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China reform plans lift shares, Dow, S&P 500 at new highs

An employee of a foreign exchange trading company looks at monitors in Tokyo November 15, 2013. REUTERS/Toru Hanai

By Herbert Lash

NEW YORK (Reuters) - Global equity markets climbed on Monday, riding economic reform plans in China, while the dollar slipped and benchmark U.S. stock indices rose to record highs, buoyed by the prospect of continued Federal Reserve stimulus.

Chinese shares listed in Hong Kong posted their biggest gain in nearly two years, while the Dow and S&P 500 surged past the psychological barriers of 16,000 and 1,800, respectively. Both U.S. indices pared some gains soon after markets opened.

The safe-haven dollar and Japanese yen fell after China announced its most sweeping economic and social reforms in nearly three decades, boosting investor appetite for higher-yielding currencies such as the Australian and New Zealand dollars.

The growth-linked currencies outperformed as a flood of global liquidity and promises to keep interest rates low continue to weigh on low-yielding currencies such as the dollar and the yen.

"Risk appetite is strong... after details of China's reform prove more dramatic than expected, suggesting a focus on market liberalization and reforms in both the government role and the broader corporate structure," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

The China Enterprises Index (HKG:^) of the top Chinese listings in Hong Kong soared 5.7 percent for its biggest daily gain since December 1, 2011.

Germany's DAX (.GDAXI) hit a record high as European shares resumed their rally on an improving outlook for the region's economy.

MSCI's all-country world stock index <.MIWD00000PUS> rose 0.53 percent, while the pan-European FTSEurofirst 300 index (FSI:^E3X) rose 0.46 percent.

The Dow Jones industrial average (^DJI) was up 49.70 points, or 0.31 percent, at 16,011.40. The Standard & Poor's 500 Index (^GSPC) was up 1.66 points, or 0.09 percent, at 1,799.84. The Nasdaq Composite Index (^IXIC) was up 1.98 points, or 0.05 percent, at 3,987.95.

U.S. Treasury debt prices made narrow gains, supported by the prospect of the Fed's continued "easy" monetary policy, but limited by investors' clear preference for riskier assets in light of that accommodation.

The dollar index (NYF:^), a measure of the greenback against a basket of currencies, slipped 0.24 percent to 80.661.

The euro drew some support after data showed the euro zone's trade surplus grew more than expected in September. The euro was up 0.29 percent at 1.3534.

The Australian dollar rose 0.33 percent to US$0.9399, while the New Zealand dollar gained 0.34 percent to US$0.8369.

Brent crude oil fell toward $108 a barrel after a week of sharp gains ahead of talks between Iran and the West that could lead to an increase in Iranian crude oil exports.

January Brent crude was down 16 cents at $108.34 a barrel, while U.S. crude for December delivery was up 16 cents at $94.00.

Trading in the U.S. Treasury market was comparatively subdued, with the benchmark 10-year Treasury note up 8/32, leaving its yield at 2.6765 percent.

Bund futures rose 15 ticks to 141.78, while 10-year German yields fell to 1.69 percent.

Germany's ZEW business sentiment indicator on Tuesday and the minutes from the Federal Reserve's October policy meeting on Wednesday may provide hints to future monetary policy moves.

(Additional reporting by Marc Jones in London; Editing by Dan Grebler)