Festive cheer takes hold of world stocks, yen on intervention watch

World stocks headed towards recent record highs as an upbeat mood gripped markets ahead of key U.S. economic growth data later on Tuesday, and the yen rallied after the sternest warning yet from Tokyo on its readiness to support the battered currency.

European shares nudged higher in early trade, while U.S. stock futures were little changed on the day and gold touched a record high just shy of breaching the $4,500 per-ounce threshold.

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

U.S. third-quarter growth figures are forecast to show the U.S. economy continued to grow at a strong 3.3% clip. Still, that would be a slight pullback from the previous quarter due in part to a sharp retreat in imports after a run-up earlier in the year ahead of the introduction of tariffs.

"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% and nearing record highs hit earlier this month, while MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%, and Tokyo's Nikkei ended flat.

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

Novo Nordisk's Frankfurt-listed shares opened nearly 10% higher in early trading on Tuesday after the U.S. Food and Drug Administration approved its weight-loss pill.

The move gives the Danish drugmaker an edge in the race to market a potent oral medication for shedding pounds as it seeks to regain ground lost to rival 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."

China's CSI300 blue-chip 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 (2026-2030), according to a readout of a housing policy work conference released on Tuesday.

INTERVENTION RISK KEEPS YEN IN CHECK

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 to date on Tokyo's readiness to intervene in the currency market to arrest sharp declines in the currency.

The yen was last up 0.7% against the dollar at 155.88. It also made broad gains against other peers like the euro and the Swiss franc.

While the BOJ raised rates at the conclusion of 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 0.2% at $1.1782 and sterling 0.3% higher at $1.3505.

Elsewhere, gold and spot silver vaulted to all-time highs, driven in part by safe-haven demand from escalating geopolitical tensions after news on Sunday that the U.S. was pursuing another tanker carrying Venezuelan oil. [GOL/]

Oil prices were broadly unchanged with Brent crude futures hovering around $62 a barrel and U.S. crude trading at around $58 per barrel. [O/R]

-Dhara Ranasinghe and Rae Wee/Reuters