Stocks near record high, dollar up on optimism, earnings

NEW YORK (Reuters) - A key index of global equity markets held near a record high on Thursday supported by mergers and acquisitions, strong corporate earnings and investor optimism spurred by U.S. President Donald Trump’s plans for public spending.

Oil prices and the U.S. dollar were boosted by the ongoing rally in stocks. Crude prices rose 2 percent and the greenback rebounded from a seven-week low.

MSCI's world index .MIWD00000PUS, which tracks shares in 46 countries, was little changed and just 2 percent off its record high hit in April 2015.

On Wall Street, the Dow Jones Industrial Average held above 20,000 after breaching that level for the first time on Wednesday, buoyed by optimism over Trump’s pro-growth initiatives and solid earnings.

The S&P 500 and the Nasdaq Composite edged higher at the open to hit record levels but finished the day little changed.

Early fourth-quarter U.S. corporate earnings have boosted sentiment and are expected to show growth of 7 percent, their biggest increase in two years, according to Thomson Reuters data.

“If all the economic data is good, if the earnings are good and the market doesn’t really seem to think anything (Trump) says or does is negative, I don’t see any downside,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

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The Dow Jones Industrial Average .DJI rose 32.4 points, or 0.16 percent, to end at 20,100.91, the S&P 500 .SPX lost 1.69 points, or 0.07 percent, to close at 2,296.68 and the Nasdaq Composite .IXIC dropped 1.16 points, or 0.02 percent, to finish at 5,655.18.

European shares climbed to a one-year high supported by merger and acquisition-related optimism. Johnson & Johnson's JNJ.N $30-billion deal to buy Actelion ATLN.S lifted shares in the Swiss biotech firm.

Europe's broad FTSEurofirst 300 index .FTEU3 closed up 0.21 percent at 1,451.12.

The dollar rebounded from its slide in recent weeks, but gains were tempered by persistent uncertainty surrounding Trump’s leanings toward protectionist trade policy.

Still, investors believed the dollar could make up some lost ground in the next few weeks, with the Federal Reserve holding its first policy meeting this year on Feb. 1.

“Although the Fed is not expected to raise rates further at that meeting, the central bank is likely to provide a clearer outlook for rate hikes in 2017, especially in view of the projected U.S. inflation trajectory under Trump’s proposed fiscal stimulus plans,” said James Chen, head of research at in Bedminster, New Jersey.

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The dollar index .DXY, which measures the greenback against a basket of six other major currencies, was up 0.53 percent at 100.56.

The Mexican peso MXN= weakened after the White House said Trump wants a 20 percent tax on imports from Mexico to pay for a wall on their shared border, deepening a crisis after a planned summit between the countries' leaders fell through.

The firmer U.S. dollar pushed gold to a two-week low but expectations that the greenback’s climb may be running out of steam helped limit losses.

Spot gold XAU= was down 0.99 percent to $1,188.39 an ounce. [nL4N1FG15Y]

U.S. Treasury debt yields fell with benchmark yields retreating from a four-week high following strong investor demand at a $28 billion auction of seven-year notes.

Benchmark 10-year notes US10YT=RR were up 4/32 in price to yield 2.508 percent, down from 2.523 percent late on Wednesday.

Oil prices rose 2 percent although gains in crude futures were capped by heavy inventories in spite of efforts by producers to cut output.

Brent crude LCOc1 settled up $1.16, or 2.1 percent, at $56.24 a barrel, and U.S. crude CLc1 settled up $1.03, or 2 percent, at $53.78.

Reporting by Saqib Iqbal Ahmed; Additional reporting by Chuck Mikolajczak and Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and James Dalgleish