Australian shares are expected to start the day higher after global equity markets climbed, with European stocks closing at a five-week high.
- The ASX 200 is set to rise after the Christmas break
- Wall Street shares were mixed after a record-setting open
- European stocks have closed at five-week high
ASX futures were up 0.6 per cent to 7,332 by 07:09am AEDT.
The Australian dollar was flat at 72.30 US cents this morning.
Asset classes from oil to equities are near or above recent highs, having clawed back losses from late November, when the Omicron variant of COVID-19 sent investors scurrying for safety.
Delays in Britain and France on imposing more COVID curbs before the end of the year also excited investors.
As the worst fears over the impact of the variant have subsided, investors have returned to risk assets.
The MSCI world equities index rose 0.07 per cent, hovering near a record high which was hit last month, and the pan-European STOXX 600 rose 0.6 per cent to end the session at a five-week high, eyeing its best month since March this year.
The S&P 500 edged lower after touching a record intraday high as a four-day rally lost steam.
"This is a holiday-shortened week. So daily movements will likely be exaggerated because of a low relative volume," said Sam Stovall, chief investment strategist at CFRA Research in New York.
In Europe, the UK government said England would not get any new COVID-19 restrictions before the end of 2021, while the French government said it would tighten measures, though there will be no curfew for New Year's Eve and schools will reopen as planned in early January.
The MSCI world equities index is up more than 17 per cent so far this year, and heading into 2022 investors are wary of risks stemming from rising price pressures, slowing corporate earnings growth and the likelihood of a rate hike cycle in the US.
"Money growth will slow in 2022, but the market strongly doubts that the ECB and the Fed are willing to truly tighten financial conditions," said Arne Petimezas, analyst at AFS Group in Amsterdam. "They now face a trade-off between controlling inflation or keeping this party going".
Oil extended its gains despite the rapid spread of Omicron, supported by supply outages and expectations that US inventories fell last week.
Brent crude oil was up, trading at $US78.99 a barrel, by 07:20am AEDT.
More to come.