Stocks hit new peaks before central bank meetings By Reuters

By Herbert Lash and Danilo Masoni

NEW YORK/MILAN (Reuters) -Global equity markets rose on Monday at the start of a big week for central bank meetings, helped by bets of fiscal stimulus in Japan and undeterred by concerns of future interest rate hikes that have tempered bonds.

Stocks on Wall Street hit record highs, led by a surging energy sector, before the benchmark retreated to trade near break-even. European stocks also hit record highs following upbeat earnings reports and a surge in banking shares.

The pan-European rose 0.7% to finish at a record closing high as the global mood was supported by Japan’s post-election boost and stabilizing coal prices in China.

The euro zone bank sector touched its highest level in more than two years and was the day’s best performer as bond yields surged on expectations the European Central Bank will hike rates next year. [GVD/EUR]

MSCI’s world equities index gained 0.25% as the rose 0.13%, the S&P 500 edged down 0.07% and the advanced 0.23%.

closed up 2.6% after Prime Minister Fumio Kishida’s Liberal Democratic Party won an unexpected comfortable victory, raising hopes for political stability and stimulus in the term ahead.

The dollar drifted lower after posting its biggest daily rise in more than four months last Friday as hedge funds pared bearish bets before the Federal Reserve’s policy meeting this week.

Markets are calm before the storm of three central bank meetings this week, said Marc Chandler, chief market strategist at Bannockburn Global Forex. The Reserve Bank of Australia meets Tuesday, the Fed on Wednesday and the Bank of England Thursday.

“Markets are worried about a more hawkish type of tapering,” Chandler said. “The Fed could drop its characterization of inflation as being transitory, and the second thing is the markets are saying as soon as the Fed gets done with its tapering, they’re going hike rates.”

Fed Chair Jerome Powell has said tapering would be over by mid-year 2022, which has been pegged as June, but that could also mean May, Chandler said.

“The market has to be on guard for a more aggressive, hawkish view from the Fed,” he said, which means market participants won’t be anxious about taking profits on long-dollar positions.

The , which tracks the greenback versus a basket of six currencies, fell 0.24% at 93.966.

The euro was up 0.28% at $1.1592, while the yen traded up 0.08% at $114.0900.

U.S. Treasury yields rose and German bond yieldsedged higher but trimmed earlier gains as investors retained their bets for two rate hikes from the ECB next year.

ECB President Christine Lagarde disappointed expectations of a firm pushback against the recent market pricing of two hikes next year, which are at odds with the…