US and European markets surged Thursday as fears of a sudden shift in central bank policy receded and lawmakers in Washington reached a deal with President Joe Biden on an infrastructure spending package.
In New York, both the S&P 500 and Nasdaq finished at records, boosted by the Biden announcement as well as a batch of mostly good economic data.
European equities also had a good day, after a reading of German business confidence rose to a nearly three-year high in June.
The Bank of England became the latest major central bank to maintain ultra-low interest rates, echoing the views of the US Federal Reserve and its fellow institution in the eurozone that inflationary spikes are only temporary.
Traders have for months worried that the blistering global recovery will fan price increases and force officials to act.
But investors have been reassured by comments from central bankers downplaying inflation.
"The committee's expectation is that the direct impact of rises in commodity prices on CPI," or consumer price index, "inflation will be transitory," minutes from the Bank of England gathering said.
"More generally, the... central expectation is that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back."
US stocks have rallied in recent sessions after the Dow last week suffered its worst week since October on worries about higher interest rates.
Investors have been reassured by appearances this week from Fed Chair Jerome Powell and other central bank officials, who have signaled that a sudden shift in monetary policy is not imminent.
"We seem to be less concerned about monetary policy," said Art Hogan, chief strategist at National Securities. He added that Biden's announcement was the "first good news we've had on infrastructure."
The agreement boosted industrial companies like Caterpillar, which rose 2.6 percent, United States Steel, which gained 3.4 percent, and aluminum company Alcoa, which won 3.7 percent.
After weeks of negotiations, a breakthrough on a tentative infrastructure agreement came after senators agreed on a $973 billion package over five years, with some $559 billion in new funding.
However, the package is still far from a done deal, as Biden's Democratic party is pressing for significant spending on a "human infrastructure" package expected to be considered in parallel legislation.
- Key figures at 2100 GMT -
New York - Dow: UP 1.0 percent at 34,196.82 (close)
New York - S&P 500: UP 0.6 percent at 4,266.49 (close)
New York - Nasdaq: UP 0.7 percent at 14,369.71 (close)
London - FTSE 100: UP 0.5 percent at 7,109.97 (close)
Frankfurt - DAX 30: UP 0.9 percent at 15,589.23 (close)
Paris - CAC 40: UP 1.2 percent at 6,631.15 (close)
EURO STOXX 50: UP 1.1 percent at 4,122.43 (close)
Tokyo - Nikkei 225: FLAT at 28,875.23 (close)
Hong Kong - Hang Seng Index: UP 0.2 percent at 28,882.46 (close)
Shanghai - Composite: FLAT at 3,566.65 (close)
Euro/dollar: UP at $1.1933 from $1.1926 at 2100 GMT
Pound/dollar: DOWN at $1.3923 from $1.3964
Euro/pound: UP at 85.70 pence from 85.41 pence
Dollar/yen: DOWN at 110.84 yen from 110.96 yen
Brent North Sea crude: UP 0.5 percent at $75.56 per barrel
West Texas Intermediate: UP 0.3 percent at $73.30 per barrel