World shares test three-week high, dollar firm

 

World shares extended gains on Tuesday, tracking a rally on Wall Street spurred by a good start to the US earnings season that put the gloss on last week's strong job data, while the dollar held near multi-year peaks.

 

European shares on the broad FTSEurofirst 300 opened up 0.6% and core and peripheral euro zone debt made early gains as a deal to drip-feed Greece the latest 6.8 billion euro instalment of its bailout added to the upbeat mood.

 

MSCI's world share index was at its highest since June 20 and in Asia, Japan's Nikkei share average finished up almost 2.6%, near a six-week high, as the yen slipped back below 101 yen to the dollar.

 

Shares markets reacted positively after Alcoa, the largest US aluminium producer, kicked off the country's reporting season with a larger-than-expected adjusted second-quarter profit.

 

The dollar index, which plots the greenback versus a basket of six major currencies, was slightly softer at 84.104 as European trading gathered pace, but was not far from Monday's three-year high of 84.588.

 

The late evening Greek aid deal in Brussels helped nudge the euro up to $1.2886 from a seven-week low against the dollar, though analysts saw the U.S currency regaining the upper hand in the coming months as its economy picks up.

 

"In the medium term I see the dollar broadly stronger," said Vasileios Gkionakis Global Head of FX Strategy at UniCredit in London. "Firstly on the back of the two dovish central bank announcements we saw in Europe last week plus the fact data in the U.S. is getting better and better."

 

Expectations that a stronger U.S. economy will give the Fed room to begin scaling back its bond-buying, most likely in September, have sparked a nearly 5% rally in the dollar and some 50-basis point rise in the benchmark 10-year U.S. bond yield since mid-June.

 

Oil futures dipped, slipping from Monday's multi-month highs as news that a major Libyan oilfield and an Iraqi pipeline were returning to service eased concerns about global oil supplies sparked by unrest in Egypt.