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London - World shares traded near five-year highs on Friday after a robust defence of monetary stimulus from the woman set to take over at the US Federal Reserve next year, while Japanese stocks headed for their best week in almost four years.
The Nikkei, made cheap for foreign investors by a falling yen, jumped 1.9% to bring its gains for the week so far to a heady 7.6%, its biggest weekly gain since December 2009.
Wall Street reached record highs on Thursday after the nominee for Fed chairperson, Janet Yellen, called efforts to boost hiring an "imperative" at a confirmation hearing.
In the to and fro of market expectations on when the Fed will begin to rein in its huge programme of bond-buying and cheap money, that was read as a signal it would hold off until well into the new year.
"The market is flourishing from a 'Yellen effect', soothing worries about liquidity to bring back foreign inflows," said Kim Hak-gyun, a market analyst at KDB Daewoo Securities.
The momentum was beginning to fade in Europe, however. The region's shares gave back modest early gains as Britain's FTSE turned flat and Germany's DAX and France's CAC 40 dipped 0.1 and 0.2%.
Both the euro currency and bond markets were also subdued after a busy 10 days which have seen the European Central Bank deliver an earlier-than-expected rate cut and one policymaker talk openly of Fed-style asset purchases.
The euro was off at $1.3452 after getting as high as $1.3497 on Thursday, while there was some mild profit taking on German and other eurozone government debt after a week of steady gains.
"Asia, the Nikkei in particular, enjoyed what Yellen said much more than Europe seems to have," said Daiwa Securities economist Grant Lewis.
"Europe has got its own particular challenges, the growth numbers in France were pretty poor yesterday... there is paradox at the moment that bad news is good news, but ultimately markets want stronger growth."
Asia rocks
The Fed finally seems to be convincing markets that even if it does taper, an actual increase in interest rates will still be distant. Short-term debt markets rallied hard as investors pushed the predicted timing of a first hike far into the future.
In just the past couple of days, Eurodollar futures have rallied so sharply that they now predict the cost of borrowing dollars will stay near zero out to 2016.
That in turn has helped drag down Treasury yields, with rates on two-year notes at just 29 basis points compared to a peak of 54 in early September.
"Yellen still believes the benefits of QE outweigh the costs - a little tidbit that could have been the most important thing she said market-wise," added William O'Donnell, chief US government bond strategist at RBS Securities.
"She did not strike me, or our economics squad, as somebody ready to roll back on QE3 and even another 200,000-plus print in the next nonfarm payroll number may not sway her."
For once the broader decline in US yields hasn't troubled the US dollar too much, in part because rates in Europe have fallen even more amid the talk of more aggressive ECB easing.
It has, however, made steady gains on the yen for three weeks to trade past the 100.00 barrier at ¥100.30. Against a broader basket of currencies, it was a fraction higher at ¥81.073
In commodity markets, Brent crude oil rose for a third straight day on worries about crude supply disruptions in Libya, while gold drew some comfort from the prospect of continued US stimulus as it faced the prospect of a third week in the red.
Brent for December delivery was last up 7 cents at $108.35 a barrel, while US crude added 25c to $94.01. Spot gold edged up to $1 283.56 an ounce and away from the week's trough of $1 260.89.
