Stock markets have begun the week on a positive note, as investors shrugged off any lingering worries about geopolitical tensions and central bank actions.

They seemed reassured that there were no further developments in the North Korea situation over the weekend, presumably on the basis that no news is good news. And despite the recent hints from the Bank of England that a UK rate rise could come as soon as November, new comments from Bank governor Mark Carney that any increases were likely to be gradual and limited saw the pound come of its recent highs. This in turn helped lift the FTSE 100, given that a weaker pound benefits exporters.

European markets were also caught up in the optimism, while on on Wall Street, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all hit new record highs ahead of the latest Federal Reserve meeting. The final scores showed:

• The FTSE 100 finished up 37.81 points or 0.52% at 7253.28
  
• Germany’s Dax rose 0.32% to 12,559.39
• France’s Cac climbed 0.3% to 5229.32
• Italy’s FTSE MIB was 0.61% better at 22,364.74
• Spain’s Ibex ended up 0.2% at 10,338.4
• But in Greece, the Athens market fell 1.99% to 760.79

On Wall Street, the Dow Jones Industrial Average is currently up 0.34% at 22,344 having earlier hit a new peak of 22,355.

On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

Brexit is likely to push up inflation, Bank of England governor Mark Carney has said, as he repeated his view that interest rates were likely to rise in the coming months.

But in his 2017 IMF Michel Camdessus Central Banking Lecture in Washington, he suggested rises would be limited, and he warned of risks to the UK economy.

These comments have seen the pound slip back further against the dollar. Down 0.26% earlier, sterling has now fallen 0.54% against the dollar to $1.3518. Against the euro the pound is down 0.65% at €1.1302. Carney said:

Any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent, and to be consistent with monetary policy continuing to provide substantial support to the economy.

There remain considerable risks to the UK outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal. The MPC will respond to these developments as they occur insofar as they affect the behaviour of households and businesses, and the outlook for inflation.

On Brexit, Reuters reports:

Carney, making a speech at the International Monetary Fund’s headquarters in Washington, said the process of globalisation that has led to deeper integration in the world economy in recent decades had pushed down price growth.

But Brexit represented the opposite for Britain, at least in the short term, as less openness to foreign markets and workers was likely to push up inflation and reduce productivity, he said.

“On balance, the de-integration effects of Brexit can be expected to ... be inflationary,” he said. “At present, the main question concerns the extent to which this adjustment has been brought forward.”

...In his speech on Monday, Carney also said Britain was unlikely to immediately offset any weakening of trade ties with its EU partners by striking new trade agreements with other countries.

“But Brexit is an example of ‘reculer pour mieux sauter,’” Carney said, using a French expression which means stepping back in order to jump better

Records are indeed being broken on Wall Street in early trading.

The Dow Jones Industrial Average has climbed to a new peak of 22,332, up more than 0.22%, while the S&P 500 is up 0.13% to a new high of 2,503. Easing tensions over North Korea are playing a part, while investors are awaiting the latest Federal Reserve meeting on Wednesday.

Over in Washington, IMF managing director Christine Lagarde is promising a new crackdown on corruption.

Channelling Captain Renault in Casablanca, Lagarde is telling a Brookings Institution event that no-one should be shocked to learn that some public officials accept bribes, and that some companies are keen to offer them.

Citing the “Panama Papers” revelations, Lagarde says the IMF can and will do more to tackle corruption.

She warns:

As we assist our members in fighting public corruption, we also are committed to looking at transnational private actors who influence public officials. Private actors may help generate corruption through direct means such as bribery, but they also can facilitate corruption through indirect means, such as money laundering and tax evasion.

The recent example of the “Panama Papers” highlights the importance of these facilitators, and underscores the pernicious way corruption can quietly spread across borders.

Increased transparency and accountability can help reduce corruption, Lagarde, adds, along with strengthening legal institutions to tackle wrongdoers....

Here’s a chart showing how the MSCI All Country World Index hit a new record high this morning.

The ACWI tracks 2,400 stocks in 47 countries, so gives a gauge of equity valuations around the globe. As you can see, it has more than doubled since 2009, when the financial crisis triggered a global recession.

So what’s behind the recovery, and can it last? Here’s a few thoughts

1) Easy Money. Central banks fired up their electronic money printing presses when the crisis broke, creating hundreds of billions of new euros, dollars and pounds to buy assets and support the economy. The idea was to make encourage commercial banks to lend, and buy riskier assets, but these asset purchase schemes ended up driving bond and share prices to record levels.

The European Central Bank (which started later) is still expanding its balance sheet, while the Bank of England isn’t close to unwinding QE.

America’s Federal Reserve is further along the path to ending easy money, having started raising interest rates. That’s why Wednesday’s Fed meeting is so important, as it will signal how quickly or slowly it will proceed along this path.

Rebecca O’Keeffe, head of investment at Interactive Investor, says:

“Central banks have underpinned equity market valuations since the financial crisis, with excess liquidity and low interest rates both providing the stimulus and the foundations for higher valuations.

What global central banks and in particular the Federal Reserve does next is therefore hugely important for investors.

2) Eurozone crisis fades from memory. Although Greece’s economy is still struggling, the prospect of European monetary union fracturing has receded over the last two years.

S&P’s decision to upgrade Portugal back to investment grade highlights how the eurozone economy, if not exactly booming, is looking much healthier.

3) China hasn’t suffered a hard landing (yet). Economists have been warning for years that China’s economy is riddled with bad debt, and that its shadow banking sector is going to implode. Beijing, though, seems to be succeeding in curbing the worst excesses without hurting growth.

4) Global economy is still growing. Despite shocks such as Donald Trump’s presidency, and the Brexit vote, the world economy is still managing steady if unspectacular growth.

The IMF predicts that global gross domestic product would rise by 3.5% this year, and by 3.6%. That should support corporate profits, and thus share prices (which ought to reflect a company’s earnings potential).

5) Geopolitical worries recede. Markets have notoriously short memories, so the recent dialling down of rhetoric between North Korea and @RealDonaldTrump is also helping to nudge shares higher.

Yesterday. US secretary of state Rex Tillerson said American hopes that a “peaceful pressure” campaign will succeed in denuclearizing North Korea. That sort of diplomatic jaw-jaw tends to reassure investors....

So, 10 years after the financial crisis, what should we worry about?

BIS, the organisation for central bankers, gave us a clue last night. It warned that global growth could stumble once interest rates start to rise. This is the ‘punch bowl’ worry - that the markets are intoxicated on cheap credit, and will slump onto the carpet when it’s taken away.

BIS’s Claudio Borio fears that the world could be caught in a debt trap, saying:

Debt service ratios are only so low because interest rates have been falling so much.

There is a certain circularity in all this that points to the risk of a debt trap: the protracted decline in interest rates to unusually low levels, regardless of the strength of the underlying economy, creates the conditions that complicate their subsequent return to more normal levels.

That ripping noise you can hear is HSBC tearing up its sterling forecasts.

The bank has ditched its forecast that the pound would have hit $1.20 by the end of 2017, and languished there through 2018. Now it believes sterling will cling onto today’s $1.35, and only slide slightly next year.

Quite a change, triggered by last week’s signals from the Bank of England that interest rates could rise in November.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

World stock markets have hit a new alltime high this morning, as traders regain their appetite for risky assets.

The City is relieved that we’ve not seen any fresh missile tests from North Korea in recent days, taking the risk of nuclear war off traders’ minds.

Investors are also preparing for a crucial US central bank meeting on Wednesday. The Federal Reserve is expected to leave interest rates unchanged, and give more guidance on how it will unwind its massive bond-purchase programme.

Marc Ostwald of ADM Investor Services says some Fed policymakers, such as Lael Brainard, may signal that US interest rates will only rise modestly.

Markets anticipate that the Fed will keep rates unchanged (with a December rate hike now seen as 50/50), but announce that it will commence balance sheet reduction at a pace of $10bn per month in Q4.

The statement will doubtless keep the option of a December rate hike clearly on the table, but markets will as ever hone in on the ‘dot plot’, with many expecting the likes of Brainard to perhaps adjust their trajectory lower

Anything that keep the era of easy money alive is good for share prices. So, the MSCI’s All Country World Index has nudged a new peak of 485.82 this morning, as traders pile back into equities.

Michael Hewson of CMC Markets reckons the markets may be getting ‘desensitised’ to the North Korean issue.

Short of shots being fired, these tensions are likely to have fairly short term and short lived effects, which helps explain the positive start to the week for Asia shares this morning which in turn is likely to lead to a positive start to this week’s European trading session.

Indeed, stock markets in Asia are at their highest level in a decade today. South Korea’s Kospi closed at a six-week high, led by tech shares, and Thailand is also rallying.

European stock markets are following suit, gaining around 0.5% at the start of trading:

Traders will also we watching out for updated eurozone inflation figures, and a speech from Bank of England governor Mark Carney this afternoon.

Here’s the agenda:

• 10am BST: The final eurozone inflation reading for August. They’re expected to confirm that prices rose by 1.5% last month, up from 1.3% in July, but still below the European Central Bank’s target of just below 2%.
  
• 4pm BST: Bank of England governor Mark Carney delivers the 2017 Michel Camdessus Central Banking Lecture in Washington DC. Investors will be looking for any fresh clues about future UK interest rate rises, but Carney may address an issue with more global appeal....