By Tom Wilson and Hideyuki Sano

LONDON/TOKYO (Reuters) – World shares gained on Wednesday on expectations of hefty U.S. spending after U.S. Treasury Secretary nominee Janet Yellen urged lawmakers to “act big” to save the economy and worry about debt later. Oil rose and the dollar slipped in response.

At her confirmation hearing on Tuesday, Yellen said the benefits of a big stimulus package to counter the coronavirus pandemic were greater than the expenses of a higher debt burden.

Pandemic relief would take priority over tax increases, she said, calling for corporations and the wealthy – both winners from Republican tax cuts in 2017 – to “pay their fair share”.

European rebounded, with the Euro STOXX 600 climbing 0.4%. Indexes in Frankfurt and Paris were both up a similar amount, though London shares were flat.

Luxury stocks gave the biggest boost, with Richemont quarterly sales climbing 5%, led by strong growth at its jewellery brands in Asia and the Middle East.

The buoyant mood mirrored that in Asia, where MSCI’s Asia-Pacific index outside Japan rose 0.8% to its highest ever. Hong Kong’s Hang Seng gained 1% to near its 2019 peak. Australian shares hit a record high.

U.S. President-elect Joe Biden, who will be sworn into office on Wednesday, last week laid out a $1.9 trillion stimulus package proposal to boost the economy and speed up the distribution of vaccines.

“They realised that there is some limits to what monetary policy can do to effect change in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue buying bonds issued by the U.S. Treasury in order to fund the fiscal programs.”

The MSCI world equity index, which tracks shares in almost 50 countries, was last up 0.1%.

On Wall Street, Nasdaq futures gained 0.6%, as Netflix jumped 12% after the close on strong growth in subscribers and projections it will no longer need to raise debt. S&P 500 futures were also up 0.2%.

Biden will take office on Wednesday under unprecedented security measures after the Jan. 6 assault on the Capitol.

DEFENSIVE DOLLAR

The dollar slipped from a one-month high after Yellen’s comments. Against a basket of currencies, it was last down 0.1% at 90.285, having climbed 1.2% from a three-year nadir hit two weeks ago.

Safe-haven gold jumped 0.8% to $1,855 per ounce.

The euro stood at $1.2145, up 0.1% and off Monday’s month-and-a-half low. It drew support from an investor sentiment survey that beat forecasts and the Italian government’s surviving a confidence vote.

Italy’s benchmark borrowing costs dropped to their lowest in over a week on Wednesday after Prime Minister Giuseppe Conte narrowly managed to stay in office – albeit now heading a minority government.

Italian 10-year bond yields dropped to their lowest since Jan. 11 – before Conte lost his majority – at 0.533%, down 2 basis points on the day.

Oil prices rose on hopes that Biden’s proposed stimulus will lift economic output.

U.S. crude futures added 0.8% to $53.39 a barrel. International benchmark Brent futures rose 0.7% to $56.31 per barrel.

“The continued acceleration of nominal income growth will ensure a continued sharp recovery in activity which will serve as a further tailwind for cyclical parts of the market, in particular materials and energy,” said Brendan Mulhern, strategist for the BNY Mellon Global Real Return Strategy at Newton Investment Management.

(Reporting by Tom Wilson in London and Hideyuki Sano in Tokyo; additional reporting by Tom Westbrook in Singapore; editing by Ana Nicolaci da Costa and Stephen Coates)