New York (AFP) - Stock markets headed higher Monday as investors eyed less aggressive US interest rate hikes this year, with inflation starting to retreat from decades-high peaks.
Comments from top Federal Reserve officials provided support to equities after they indicated the central bank could lift rates at a slower pace compared with 2022.
"Investor confidence has surged into the Lunar New Year after China lifted its drastic Covid restrictions and hopes have risen that the end to interest rate hikes may finally be in sight," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
"There have been signs economies may prove more resilient in the downturn," she added.
Analysts pointed to a Wall Street Journal report signaling the likelihood of a smaller 25-basis point increase when the Fed next meets at the end of this month.
Investors will also be looking to US inflation data coming out Friday in the hopes it will give the Fed added reason to slow its rate hikes.
Wall Street bounded higher in a week that is heavy with earnings reports from big companies including Microsoft, Intel and Boeing.
Briefing.com analyst Patrick O'Hare said investors will be looking in particular at what companies say about their 2023 earnings prospects.
With stock valuations higher than their 10-year average, O'Hare said "companies reporting their results this week can't blow it with their guidance."
All three major US indices finished solidly higher, led by the tech-rich Nasdaq, which piled on two percent.
Tech shares have gotten a boost from a wave of layoffs in the sector as investors reward firms prioritizing the bottom line.
Music streaming firm Spotify became the latest on Monday, joining the likes of Google, Microsoft and Amazon, with six percent of its staff set to leave.
The Swedish company's share price jumped 2.1 percent in New York.
In Europe, London, Frankfurt and Paris all ended higher.
In Asia, trading was thin with a number of stock markets closed for the Lunar New Year holiday.
Tokyo was the standout performer in Asia, rallying more than one percent following a blockbuster pre-weekend performance on Wall Street as tech shares rallied.
Although most Asian markets were closed for Lunar New Year celebrations, "Japanese and Australian stocks are picking up on the better mood from US investors and on expectations of China's economy returning to some semblance of a pre-pandemic trend," said SPI Asset Management's Stephen Innes.
The euro on Monday reached the highest level since April last year, at $1.0927, before slipping back.
Key figures around 2120 GMT
New York - Dow: UP 0.8 percent at 33,629.56 (close)
New York - S&P 500: UP 1.2 percent at 4,019.81 (close)
New York - Nasdaq: UP 2.0 percent at 11,364.41 (close)
London - FTSE 100: UP 0.2 percent at 7,784.67 (close)
Frankfurt - DAX: UP 0.5 percent at 15,102.95 (close)
Paris - CAC 40: UP 0.5 percent at 7,032.02 (close)
EURO STOXX 50: UP 0.8 percent at 4,150.82(close)
Tokyo - Nikkei 225: UP 1.3 percent at 26,906.04 (close)
Hong Kong - Hang Seng Index: Closed for a holiday
Shanghai - Composite: Closed for a holiday
Euro/dollar: UP at $1.0877 from $1.0856 on Friday
Pound/dollar: DOWN at $1.2374 from $1.2397
Euro/pound: UP at 87.82 pence from 87.57 pence
Dollar/yen: UP at 130.66 yen from 129.60 yen
Brent North Sea crude: UP 0.6 percent at $88.19 per barrel
West Texas Intermediate: DOWN less than 0.1 percent at $81.62 per barrel
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