Festive cheer takes hold of world stocks, yen lifted by FX warning

World stocks rallied on Tuesday with European shares hitting record highs ahead of U.S. economic growth data later on, while the yen shot up after the sternest warning yet from Tokyo on its readiness to support the battered currency.

The pan-European STOXX 600 index briefly hit a record high on gains in the healthcare sector, after heavyweight Novo Nordisk secured U.S. approval of its weight-loss pill.

U.S. stock futures were little changed and gold touched a record high just shy of breaching the $4,500 per-ounce level.

U.S. economic releases, delayed by a record government shutdown, were the main focus in a holiday-shortened week for much of the world.

Third-quarter growth figures are forecast to show the U.S. economy continued to grow at a strong 3.3% clip, albeit slower than the 3.8% expansion recorded in the second quarter.

"It does feel like we can relax a bit and the holiday risk premium has gone down," said James Rossiter, head of global macro strategy at TD Securities in London. "On GDP, we are looking for upside risks with a number of 3.5%, with consumer demand growing at a decent clip. So, it should be a good news report day."

MSCI's world stock index was last up 0.2%, nearing record highs hit earlier this month.

Japan's blue-chip Nikkei closed little changed on the day and China's blue-chip CSI300 index rose 0.2%.

China will step up urban renewal and deepen efforts to stabilise its property market in 2026 as it prepares to launch its latest Five-Year Plan, according to a readout of a housing policy work conference released on Tuesday.

Overnight, Nvidia shares rose after Reuters reported that the company told Chinese clients it aimed to start shipping its second-most powerful AI chips to China before the Lunar New Year holiday in mid-February.

Novo Nordisk rallied 7.5% on Tuesday after the U.S. Food and Drug Administration approved its weight-loss pill, giving the Danish drugmaker a competitive edge in the fast-evolving obesity treatment market.

The approval positions Novo Nordisk ahead in the race for a potent oral weight-loss medication as it works to recover market share lost to Eli Lilly.

"Risk-on sentiment is dominating Wall Street to begin the week of Christmas, with investors raising equity and commodity exposures as we approach year-end," said Jose Torres, senior economist at Interactive Brokers. "For now, traders are taking their cue from the general sense amongst participants that there's little standing in the way for a Santa Claus rally to manifest."

BATTERED YEN WINS A RESPITE

The yen rallied as investors weighed the odds of an imminent intervention from Japanese authorities to shore up the currency. Japan has a free hand in dealing with excessive moves in the yen, Finance Minister Satsuki Katayama said on Tuesday, issuing the strongest warning so far about Tokyo's readiness to intervene in the currency market to arrest sharp declines in the currency.

The yen was last up 0.7% at 155.88 per dollar and made broad gains against the euro and the Swiss franc .

While the BOJ raised rates at its December policy meeting on Friday, the move was widely expected and Governor Kazuo Ueda offered few hints on the extent of future rate hikes.

"Their message is so underwhelming ... you hike, but you need to hike with conviction. They didn't hike with conviction," said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis.

The dollar slipped against other major currencies, with the euro up 0.3% at $1.1795 and sterling 0.4% higher at $1.3514.

Elsewhere, gold and spot silver vaulted to all-time highs on a weaker dollar and persistent geopolitical uncertainty.

Oil prices were little changed as the impact of potential sales of Venezuelan crude seized by the United States was countered by heightened supply disruption fears after Ukrainian attacks on Russian vessels and piers.

Brent crude futures were up just 7 cents or 0.1% at $62.13 a barrel, while U.S. crude was just a touch firmer on the day at around $58 per barrel.