Shares return to record high as Irma loses strength

LONDON, Sept 11 (Reuters) - World shares returned to a record high on Monday, on relief that hurricane Irma looked to be losing strength in the United States and that North Korea's anniversary celebrations at the weekend passed without any new missile test.

MSCI All Country World Index, which tracks roughly 2,400 stocks in 47 countries, climbed to its latest peak as Europe's insurers rose more than 2 percent on hopes Irma's damage would not prove as costly as feared.

Wall Street's main markets were expected to gain around 0.5 percent when they reopen, having lost ground last week as the storm approached.

Irma caused a number of deaths and knocked out electricity to 3 million homes and businesses on its way up the Florida coast. But as the start of U.S. trading neared, it had weakened to a tropical storm and was expected to slow to a tropical depression by Tuesday.

The relief over North Korea and a weaker yen had also given Tokyo its best session since June in Asia, as investors began to lose their appetite for safer assets like gold and U.S. Treasuries.

Winning a reprieve from risk aversion, the dollar registered its biggest gains in the currency markets in 10 days. It added 0.5 percent against its perceived safe-haven counterpart, the Japanese yen, and regained ground against the high-flying euro as a top ECB policymaker cautioned against the single currency's recent rise.

"The fact the worst-case scenario for Hurricane Irma hasn't happened and that North Korea managed to get though its national day without sticking two fingers up at the rest of the world has helped ratchet the tensions down," said CMC Markets senior analyst Michael Hewson. "So I think we are going to see the S&P and the Dow gap higher on the open."

Japan's Nikkei had risen 1.4 percent after Pyongyang held a celebration to congratulate the nuclear scientists and technicians who steered the country's sixth and largest nuclear test a week earlier.

The United States and its allies had been bracing for another long-range missile launch to mark the 69th anniversary of North Korea's founding on Saturday.

The sense of relief lifted E-Mini futures for the S&P 500 by 0.5 percent, while yields on 10-year Treasury notes rose 3 basis points to 2.09 percent, after barely budging in European trading.

South Korea's main index added 0.8 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent.

"It's too early to say the (North Korean) risks are gone, but one thing for sure is that market players now think the situation won't get worse as it did some weeks ago," said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul.

Lee said many foreign investors and domestic institutions were purchasing South Korean tech and chemicals shares as quarterly earning season neared.

The U.N. Security Council is set to vote on Monday on a watered-down U.S.-drafted resolution to impose new sanctions on North Korea over its recent nuclear tests, diplomats said. It was unclear whether China or Russia would support it.

RELAXED YUAN CONTROLS?

The dollar hovered at 108.50 yen, up from Friday's 10-month trough of 107.32. Against a basket of currencies, it added 0.15 percent to 91.490, still close to last week's 2 1/2-year low of 91.011.

The euro eased to $1.2020, having hit a top of $1.2092 on Friday amid speculation the European Central Bank was closer to starting a wind-back of its stimulus program.

China's central bank was also a focus in Asia after it confirmed reports that it planned to scrap reserve requirements for financial institutions settling foreign exchange forward yuan positions with effect from Monday.

"The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation," analysts at ANZ said in a note. "The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports."

The dollar was up 0.3 percent against the offshore yuan at 6.5269 yuan, off a low of 6.4437.

There were also reports Beijing was planning to shut down local crypto-currency exchanges, dealing a blow to bitcoin's recent rally.

Bitcoin was quoted at $4,185 on the BitStamp platform, off a recent record high of nearly $5,000.

In commodity markets, gold slipped 0.7 percent to $1,337.81 an ounce, away from a one-year peak of $1,357.54.

Oil prices regained ground after the Saudi oil minister discussed the possibility of extending a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.

The news of the talks on Sunday helped offset the downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma.

U.S. crude was trading 20 cents firmer at $47.68 a barrel, while Brent slipped 24 cents to $53.50.

(Additional reporting by Wayne Cole in Sydney; editing by Larry King)