By Saqib Iqbal Ahmed
NEW YORK (Reuters) - A key index of global equity markets rose to a 20-month high on Friday, with Wall Street shares hitting records for a second straight day, as investors continued to bask in the afterglow of U.S. President Donald Trump's promise of tax reform.
The dollar hovered near an 11-day high against a basket of major rivals, as Trump and Japanese Prime Minister Shinzo Abe opened two days of talks looking to cement a decades-old alliance.
The MSCI's world index, which tracks shares in 46 countries, rose after evidence of Chinese growth lifted shares in Asia and Europe.
Strength on Wall Street boosted the index further and it was up 0.41 percent to the highest since May 2015.
Trump's promise of a "phenomenal" tax plan helped reignite a post-election rally in stocks, which had stalled in recent weeks on concerns over his protectionist stand and the lack of clarity on policy reforms.
"Investors were worried that the administration may have gotten off track and was pursuing other items," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
"Tax cuts have gotten put back on the front burner," Forrest said, adding, "We are looking for gains in the economy at large from this, not just (earnings per share) gains in stocks."
The Dow Jones Industrial Average rose 96.97 points, or 0.48 percent, to finish at 20,269.37, the S&P 500 gained 8.23 points, or 0.36 percent, to close at 2,316.10 and the Nasdaq Composite added 18.95 points, or 0.33 percent, to end at 5,734.13.
The ongoing corporate earnings season added to the upbeat mood. Activision Blizzard's shares surged nearly 19 percent to give the biggest boost to the S&P 500 and the Nasdaq, after the videogame publisher reported higher-than-expected revenue on Thursday.
In Europe, shares edged higher, ending the week in positive territory thanks to corporate earnings and robust basic resources stocks.
Europe's broad FTSEurofirst 300 index closed up 0.15 percent at 1,448.70.
The U.S. dollar held its recent gains against a basket of major rivals as comments from Trump during a news conference with the Japanese Prime Minister did little to shake optimism his administration would overhaul tax policy soon.
"The underlying bigger story in the last 24 hours is that Trump has put the reflation trade back on the front foot by talking about a tremendous tax program," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.
The dollar index, which measures the greenback against six major rivals, was up 0.12 percent to 100.77.
In bond markets, U.S. Treasury debt yields edged higher, boosted by solid monthly import price data as investors acted largely on technical data.
Technical positioning in limited trading volume shifted markets through the day as a weak reading on U.S. consumer confidence forced traders to re-examine the market's momentum.
Benchmark 10-year U.S. Treasury note yields were down 3/32 in price to yield 2.406 percent, up from a yield of 2.397, late on Thursday.
Oil prices rose after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a deal that took effect in January.
Brent crude settled up $1.07, or 1.92 percent, at $56.70 a barrel, and U.S. crude settled up 86 cents, or 1.62 percent, at $53.86.
(Additional reporting by Lewis Krauskopf, Sam Forgione and Dion Rabouin in New York; Editing by Nick Zieminski and James Dalgleish)