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By Herbert Lash and Marc Jones
NEW YORK/LONDON (Reuters) - A record rebound in U.S. retail sales, fresh support from the Federal Reserve and Bank of Japan, and upbeat trial results for a COVID-19 treatment boosted risk appetite on Tuesday, driving global equity markets higher and strengthening the dollar.
U.S. Treasury yields rose, as did demand for lower-rated southern European debt, on the upbeat sentiment, even as a fresh coronavirus outbreak in China spurred gold higher in see-saw trade.
A near 5% jump overnight by Japan's Nikkei <.N225> gave Asia <.MIAP00000PUS> its best day since late March, while the major European bourses rallied around 3%. There were no declining stocks on Frankfurt's 30-component DAX <.GDAXI>, only one on the CAC40 <.FCHI> in Paris and three out of 109 on the FTSE 100 <.FTSE> in London. Wall Street surged, though not as much.
U.S. retail sales jumped the most on record in May, offering new evidence the recession triggered by the coronavirus pandemic might be drawing to an end, while trial results showed dexamethasone reduced death rates by about one-third among the most severely ill COVID-19 patients.
A report overnight said the Trump administration was preparing a nearly $1 trillion infrastructure proposal in another stimulus boost, after the Federal Reserve on Monday said it would start buying corporate bonds to inject liquidity.
"It looks like we bounced back nicely in May for retail sales, which is good news. The drug results are very good news and then the spending package is good news," said Patrick Leary, chief market strategist at debt underwriter Incapital.
"All this stuff is bullish for stocks, bullish for corporate bonds," Leary said. "Congress has the ability to support the economy through their spending powers, the Fed is doing what it can through its lending powers."
Fed Chair Jerome Powell told U.S. lawmakers as he began the first of two days of testimony that a full U.S. economic recovery will not occur until the American people are sure that the coronavirus epidemic has been brought under control.
"The medical news trumps the economic news," Leary said. "No one's worried about the underlying issues in the economy - they're worried about COIVID-19."
MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 1.98%, while the pan-regional FTSEurofirst 300 index <.FTEU3> closed up 2.90% and emerging market stocks rose 2.28%.
The Dow Jones Industrial Average <.DJI> rose 394.09 points, or 1.53%, to 26,157.25. The S&P 500 <.SPX> gained 43.33 points, or 1.41%, to 3,109.92 and the Nasdaq Composite <.IXIC> added 119.61 points, or 1.23%, to 9,845.64.