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S&P 500 edges to yet another record close

Monday 21:00 GMT. US stocks enjoyed yet another record-breaking session as a flurry of merger and acquisition activity and some encouraging German economic data added to the after glow from Friday's bout of global central bank dovishness.

In New York, the S&P 500 equity benchmark rose 0.3 per cent to 2,069, a third successive record close - although it failed to break above Friday's all-time intraday peak of 2,071.46.

Across the Atlantic, the FTSE Eurofirst 300 pared an early advance but still ended 0.1 per cent higher at a two-month high. BT shares rose 3.7 per cent after the telecoms group said it was in talks to acquire either the EE or O2 wireless operators.

Chinese equities got their first chance to respond to the unexpected cut in interest rates by the People's Bank of China - as well as reports that further easing could be in the pipeline.

The Shanghai Composite index rose 1.9 per cent to a three-year high while, in Hong Kong, the Hang Seng China Enterprises Index of "H" shares climbed 3.8 per cent, its biggest one-day gain in a year. Tokyo was closed for a holiday.

According to media reports, the central bank was ready to cut rates further to head off slowing inflation.

"Needless to say anytime the market gets a sense the Chinese government and central bank are poised to apply more muscle to stabilising and boosting growth you are going to see a strong rally in regional shares," said Adrian Miller at GMP Securities.

Divyang Shah, global strategist at IFR Markets said further monetary stimulus in the form of rate and reserve ratio requirement cuts, and "smart" fiscal stimulus, were likely in the first half of next year as policy makers deal with slower growth with greater urgency.

"The shift away from targeted easing should not be seen as a return to the old days of prizing growth above anything else - the emphasis on reforms and responsible lending will remain in play," Mr Shah said.

"Instead, officials are uneasy at the pace of structural reforms and want to slow things down a touch to keep growth from falling below 7 per cent."

Meanwhile, the outlook for the eurozone economy - another thorny subject for the markets - appeared to improve as Germany's Ifo index of business confidence rose for the first time in seven months. November's reading came in at 103.2, up from 104.7 - defying expectations for a fall.

"Finally, stabilisation," said Carsten Brzeski, economist at ING.

"In our view, the Ifo index is currently the best single leading indicator for the German economy. Therefore, today's Ifo reading gives clear comfort for our view of an accelerating economy in the final quarter of the year."

Andreas Rees, chief German economist at UniCredit, warned that translating the latest sentiment indicators into hard data still painted a subdued picture.

"To put it in a nutshell, it is likely that the German economy is more or less stagnating at year-end again, after basically zero growth since spring," he said.

"However, given the turnaround in business expectations, there is some hope further down the road that the German economy will shift from first into second gear in the first quarter of 2015."

The data came hard on the heels of Friday's dovish comments from Mario Draghi, president of the European Central Bank, that heightened expectations of further stimulus measures to boost the economy.

However, Jens Weidmann, the Bundesbank president, warned on Monday of the legal hurdles the ECB could face if it embarked on a programme of eurozone sovereign bond buying.

The euro came close to a two-year low against the dollar, before rebounding to stand 0.4 per cent higher at $1.2442. The euro's rally helped push the US currencydown 0.2 per cent from Friday's four-year high against a basket of its peers.

US government bond prices were a shade firmer heading towards the Thanksgiving break, with the yield on the 10-year Treasury down 1 basis point at 2.30 per cent.

The equivalent-maturity German Bund yield rose 1bp to 0.78 per cent, although Spain's 10-year yield fell below 2 per cent for the first time and yields on several other eurozone sovereigns also hit fresh record lows.

Industrial commodities failed to attract follow-through buying in the wake of Friday's solid gains. Copper fell 0.7 per cent in London to $6,675 a tonne, after hitting a three-week high of $6,772 at the end of last week. Brent crude settled 68 cents lower at $79.68 a barrel.

And gold found little support from the broadly softer dollar, with the metal slipping $3 to $1,198 an ounce.

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