Stock markets rallied Monday, building on last week's momentum as investors priced in the expectation of further interest rate hikes aimed at taming decades-high inflation.
The euro surged against main rivals, a day after German central bank chief Joachim Nagel signaled that the European Central Bank (ECB) would probably continue raising its key interest rate, an echo of a similar statement from Federal Reserve Chair Jerome Powell on Friday.
Investors worldwide are awaiting key US consumer price data for August, due Tuesday, with the annual inflation pace expected to ease to eight percent -- still well above the Fed's target of two percent.
That will be welcome relief, but is unlikely to be enough to sway the Fed from an expected three-quarter percentage point interest rate hike next week, the third consecutive increase of that size.
The ECB raised its key rate by a historic 75 basis points last week, and markets expect a similar-sized move at the October policy meeting.
Wall Street stocks ended with solid gains Monday -- the broad-based S&P 500 advanced 1.1 percent -- continuing the upswing last week that snapped a three-week losing streak.
Equities have been volatile of late as speculation about whether the Fed might ease up on its aggressive rate hikes in the near future sparks alternating hopes and fears.
Fed officials have more or less ended the debate, saying while the increases may become smaller, the benchmark lending rate will not be coming down any time soon.
- Dollar loses ground -
The European single currency rocketed more than 1.4 percent against the dollar and 1.6 percent versus the yen before trimming gains.
The US dollar also fell sharply against the pound sterling and the Swiss franc.
In equities, Frankfurt led the way, closing more than two percent higher, followed by Paris and London not far behind after data showed the British economy rebounded slightly in July.
Tokyo closed with a gain of more than one percent thanks to a weaker yen. Markets in Hong Kong, mainland China and South Korea were closed for a public holiday.
Oil prices gained Monday but remain pressured by the possibility of global demand weakening as growth slows and China's harsh zero-Covid policy continues to sap economic activity.
- Key figures at around 2100 GMT -
New York - Dow: UP 0.7 percent at 32,381.34 (close)
New York - S&P 500: UP 1.1 percent at 4,110.41 (close)
New York - Nasdaq: UP 1.3 percent at 12,266.41 (close)
London - FTSE 100: UP 1.7 percent at 7,473.03 points (close)
Frankfurt - DAX: UP 2.4 percent at 13,402.27 points (close)
Paris - CAC 40: UP 1.95 percent at 6,333.59 points (close)
EURO STOXX 50: UP 2.1 percent at 3,646.51 points
Tokyo - Nikkei 225: UP 1.2 percent at 28,542.11 (close)
Hong Kong - Hang Seng Index: closed for public holiday
Shanghai - Composite: closed for public holiday
Euro/dollar: UP at $1.0120 from $1.0046
Pound/dollar: UP at $1.1680 from $1.1587
Euro/pound: DOWN at 86.64 pence from 86.84 pence
Dollar/yen: DOWN at 142.82 yen from 142.56 yen
Brent North Sea crude: UP 1.24 percent at $94.00 per barrel
West Texas Intermediate: UP 1.14 percent at $87.78. per barrel