By Mike Bird
European stocks opened higher Tuesday, the first major trading day of the new year, while the dollar strengthened against currencies around the world.
The Stoxx Europe 600 index rose by 0.77% in late morning trading.
In the U.S., S&P 500 futures rose 0.77% ahead of the U.S. open. Changes in equity futures don't necessarily reflect moves after the opening bell.
Futures for the Dow Jones Industrial Average index also climbed, rising by 0.77% to 19,869, closer to the 20,000 landmark that the index has flirted with for three weeks.
The U.S. dollar strengthened across theboard, with the future direction of the greenback a key factor for global markets in the new year, from emerging market debt to European exporters to commodities.
The WSJ dollar index, which is compiled from a basket of international exchange rates, has risen by more than 6% since the Nov. 8 U.S. presidential election.
The Chinese yuan was fixed 0.2% lower against the dollar and the greenback gained 0.78% to 118.3 Japanese yen. The euro fell 0.74% to $1.039.
"We ended the year with nothing to dampen the optimism about the 2017 economic outlook," said Kit Juckes, global head of foreign-exchange strategy Société Générale SA.
"Expectations of easier fiscal policy in the U.S. and more tightening by the Fed are going to be taking the dollar higher," he added.
The U.S. Federal Reserve expects to raise interest rates three times in the next year. Rate increases tend to draw in money looking for higher returns, boosting a local currency.
Analysts are mixed on where the dollar will trade through the year. Analysts at Morgan Stanley expect another 5% rise for the trade-weighted dollar by the end of 2017, while J.P. Morgan forecasts suggest it will fall by 8%.
European banks--one of the biggest gainers from the global equity rally at the end of 2016--were up by more than 2.2%.
"If the legal liabilities that have plagued banks are nearly over, the Italian banks are in the process of finally getting fixed and capital requirements are close to being met, we could see 2017 as the year of banks globally," said Said Haidar, CEO of Haidar Capital Management, a New York-based hedge fund.
Yields on global sovereign bonds rose, with Germany's 10-year bund yields leading the rise, up to 0.262%, from 0.19% on Monday.
That rise followed regional inflation data from Germany, which showed price pressures building in Europe's largest economy.
Prices in Bavaria and Saxony rose by 1.7% and 1.8% on the year in December, while prices in Hesse rose by 1.9%, sharp increases from November's figures, which all showed inflation of less than 1%.
U.S. 10-year Treasury yields also ticked higher, rising to 2.516% from 2.448% Monday.
Asian equity markets rose, with Hong Kong's Hang Seng climbing 0.68% in afternoon trading and South Korea's Kospi index up 0.88%. Japan's Nikkei 225 was closed for a holiday.
Write to Mike Bird at Mike.Bird@wsj.com
(END) Dow Jones Newswires
January 03, 2017 07:34 ET (12:34 GMT)
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