By Marc Jones
LONDON (Reuters) - World stock markets climbed strongly on Thursday, with investors basking in the afterglow of a break past 20,000 points for Wall Street's record high Dow Jones index.
MSCI's 46-country All World index was within touching distance of its lifetime high as European stocks rose to their highest since Dec. 2015, completing a global loop after Asia's main bourses also saw a bumper session.
The "Trump trade", based on hopes of U.S. stimulus reflating growth, would appear to be back on - egged on by some impressive corporate earnings, higher commodity prices and signs that growth is finally finding some traction worldwide.
The Dow's record run looked set to continue later and the curious outlier of recent weeks, the dollar, pushed off seven-week low it had hit after Trump confirmed he was ready to start building his controversial border wall with Mexico.
There were no such wrinkles in bond markets. Ten-year U.S. Treasury yields were back above 2.53 percent to their highest of 2017 so far and the equivalent German and French yields jumped to their highest levels in over a year.
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"The reflation trades are being driven by two main things," said Neil Williams, chief economist at fund manager Hermes.
"Countries more willing to open the fiscal box and we are awaiting Mr Trump's long-awaited tax cuts in mid-year. And second is the prospect of ultra-loose monetary policy."
In commodities, crude oil prices also bounced as global sentiment lifted and the dollar weakened, which helps non-U.S. buyers of dollar-denominated raw materials.
U.S. crude was up 0.8 percent at $53.18 a barrel after losing the same amount the previous day. Brent added 0.8 percent to $55.53 a barrel, while cooper hit a two-month high as a strike loomed at the world's biggest mine in Chile.
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Wall Street traders were already sifting through results from the likes of Ford, Caterpillar and Dow Chemical. Service sector PMI numbers are also due later to provide the macro temperature of the world's largest economy.
The Dow Index had been flirting with 20,000 points for weeks so it brought widespread cheer - and cap brandishing - when it broke through. It only topped 19,000 in November and this was the second-shortest time on record to jump 1,000 points.
SEB investment management's global head of asset allocation Hans Peterson said he was now taking stock following the moves.
"We are neutral on the U.S. (stocks)" he said. "We think it is sort of stretched although not extremely stretched and not as far as it has been, but (U.S. Treasury) yields are going up and the dollar might be closer towards its turing point."
Europe's cross-country European STOXX 600 index was trading 0.3 percent higher by 1300 GMT at its highest since December 2015. Germany's DAX hit its highest since May 2015 and London's FTSE was near an all-time record.
Milan also showed little sign of nerves after Italy's constitutional court on Wednesday opened the way for new elections this year, potentially in the summer and one which will be another populist battle.
Asian shares had a good day too. Japan's Nikkei brushed aside a stronger yen to rise 1.7 percent, Hong Kong's Hang Seng climbed 1.3 percent and Shanghai edged up ahead of a week-long Lunar New Year holiday.
"Today's excitement mainly comes from strong U.S. stocks overnight, but people are also positive about Japanese companies' earnings, especially machinery manufacturers," said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.
Back in the currency markets, sterling hit a six-week high after solid GDP data before fizzling. The dollar index, which tracks the greenback against six other top currencies, clawed back from its overnight lows to stand flat on the day.
"The problem that the greenback is having right now is two- fold - first Trump has been talking down the currency and second, his policies make foreign investors nervous," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Gareth Jones)