Global stock markets rallied while the dollar and government bond prices fell after encouraging Chinese factory data raised further hopes for the global economic recovery.

The S&P 500 index pushed 1.5 per cent higher to a record 3,676 points, building on a global rally spurred by coronavirus vaccines that sent the US blue-chip index almost 11 per cent higher in November. The technology focused Nasdaq Composite also hit a record high of 12,308, up 1.1 per cent.

Treasuries and the dollar weakened, meanwhile, as the upbeat mood on markets put haven assets out of favour.

The yield on 10-year Treasury notes, which moves inversely to the price of the securities, rose 0.08 percentage points to 0.91 per cent. The dollar, as measured against a basket of other major currencies, slipped 0.4 per cent, bringing the euro to its strongest level since mid-2018.

This came after a survey run by Chinese publication Caixin found industrial activity in the world’s second-largest economy was accelerating at its fastest pace in a decade in November.

“This validates the idea that when you get the pandemic under control and you really manage to keep it low, economies can catch up extremely rapidly,” said Samy Chaar, chief economist at Lombard Odier.

In Europe, the Stoxx Europe 600 rose 0.8 per cent, having gained almost 14 per cent in November, in a record month for the regional equity benchmark. The UK’s FTSE 100, which just achieved its best month since 1989, climbed 2 per cent. Germany’s Dax added 0.9 per cent.

The FTSE has been has been one of the worst-performing major stock markets in the world during 2020, falling almost 16 per cent.

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But the UK large-cap index has a large concentration of commodities and metals producers whose fortunes are pinned to Chinese demand. Value stocks — unloved companies in economically sensitive sectors that often do well as recessions come to an end — also make up more than a third of the FTSE, according to Goldman Sachs.

“We believe the key factors driving FTSE 100 remain commodity prices and value versus growth,” Goldman’s strategists wrote in a research note.

On Tuesday, the price of copper, the world’s most important industrial metal, hit $7,719 a tonne, its highest point since March 2013.

The Cboe Vix, which measures investors’ expectations of share price volatility on the S&P 500, fell to a reading of 20.1 — its lowest since late February.

Last month was among the strongest on record for bourses across the globe, but investors should not expect gains “in a straight line from here”, warned Yuko Takano, equities portfolio manager at Newton Investment Management.

Even if Covid-19 vaccines are approved swiftly, governments still face the task of administering the jabs, said Ms Takano, and “it is winter, it’s getting cold, [so] we’re going to see an ugly next wave of the virus hitting a lot of developed countries”.

Financial markets “were going to still be working under a lot of uncertainty” and would face significant volatility “for the next month of the next quarter”, she added.

Via Financial Times