* Wall Street expected to extend record highs
* Dollar consolidates gains after recent rally; yuan bounces
* Oil drifts up on planned production cuts, dlr pause
* Metals rally continues
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Nov 22 World stocks rode the slipstream
of the first joint all-time high for Wall Street's four main
markets since 1999 on Tuesday, with commodity firms adding extra
lift as they eyed an OPEC oil output cut and surge in U.S.
building under Donald Trump.
A powerful earthquake hitting the same part of Japan that
suffered a nuclear disaster in 2011 nudged up the safe-haven yen
and cooled the dollar's recent 10 percent gain which had
lifted it to a 13-1/2 year high in recent days.
A sustained rally in oil and metals helped the likes of the
Australian and Canadian dollars as U.S. stock index
futures also pointed to an extension of Wall Street's post-U.S.
election rally after its 16-year milestone on Monday.
"The fact Trump was elected means it is now seen as certain
that you will see a rise in inflation and that the Fed is going
to hike rates," said Nataxis head of equities strategy Sylvain
Goyon. "Some of his strategies are really pro-growth."
Asia's top bourses had made solid gains overnight despite
the clearest signal yet from U.S. President-elect Trump that he
will shake up trade with the region.
Europe also spent the day on the front foot, with London's
FTSE, Frankfurt's DAX and the CAC 40 in
Paris up between 0.6 - 0.8 percent ahead of U.S. trading.
The European basic resources index, which has now
doubled from its January lows, was the best performing sector
as big names Anglo American, BHP Billiton and
Antofagasta jumped 4 to 5 percent.
Having surged 4 percent on Monday, oil prices were nudging
$50 a barrel again. Russian President Vladimir Putin raised
hopes that producers will agree to limit output at an OPEC
meeting next week.
Benchmark bonds meanwhile were taking a break from the surge
in yields and plunge in prices since Trump's unexpected victory
earlier this month.
The difference between German and U.S. bond yields were back
near multi-decade extremes after two of European Central Bank's
top policymakers reaffirmed the bank's commitment to its mass
stimulus programme ahead of a flagged review next month.
"The return of inflation towards our objective still relies
on the continuation of the current, unprecedented level of
monetary support, in spite of the gradual closing of the output
gap," ECB President Mario Draghi told a hearing in Strasbourg.
The bank is also likely to be wary about the uncertainty if
Italy's government, as opinion polls currently suggest, loses a
referendum on constitutional changes days before the ECB meets.
The dollar was beginning to claw higher as New York FX
trading resumed. It was back level against the yen at 110.85
and was on top again against the euro and sterling at
$1.06 per euro and $1.2427 to the pound.
British finance minister Philip Hammond got some rare good
news about the country's finances on Tuesday as he finalises his
first budget statement, which is still likely to forecast a
surge in borrowing as Britain prepares to leave the EU.
Breaking with a pattern of borrowing overshoots earlier in
the financial year, official figures showed public borrowing in
October was 25 percent less than a year earlier at 4.8 billion
pounds ($6.0 billion), its lowest since 2008 and beating all
Outlining plans on Monday for his first day in office next
year, Trump pledged to withdraw from the TPP Asia-Pacific free
Such a move may lead to retaliation by trade partners such
as China and could potentially derail markets, Libby Cantrill,
head of public policy at bond giant PIMCO, said.
But for now, expectations that his administration will adopt
expansionary fiscal policies have pushed developed market stocks
higher and even emerging market shares seem to have settled over
the last week, having initially been hit hard.
Overnight, MSCI's broadest index of Asia-Pacific shares
outside Japan rose 1.3 percent, pulled up by a
1.3 percent rally in Australian shares. Korean shares
and Hong Kong stocks rose 0.9 and 1.3 percent
Investors in Japanese stocks appeared unfazed by Tuesday's
big earthquake near the 2011 Fukushima disaster site in northern
Japan, with the benchmark Nikkei average closing up 0.3
The 7.4 magnitude shock had briefly disrupted cooling
functions at a nuclear plant and generated a small tsunami.
"Most of the flow into stocks seems to be retail-oriented
with institutional investors preferring to sit out the rally
unless they get a clearer picture on Trump's economic team,"
said Andrew Sullivan, managing director, sales trading at
Haitong International Securities Group in Hong Kong.
The dollar's mild weakness propped up gold prices with spot
gold up 0.2 percent at $1215 per ounce. Gold prices have
fallen 10 percent since the U.S. election outcome.
It also helped emerging market currencies trim some losses
after a recent battering. The Chinese yuan rebounded
from a near 8-1/2 year low hit on Monday and emerging market
equities rose more than one percent to 11-day highs.
With markets moving higher, volatility indicators receded.
The CBOE Volatility Index, a so-called "fear gauge",
fell 3.4 percent.
(Additional reporting by Saikat Chatterjee in Hong Kong;
Editing by Catherine Evans)