President Donald Trump has helped drive up stock markets on Wall Street and in London to new highs, after he promised corporate tax cuts and a spending splurge on infrastructure projects to boost the economy.

The Dow Jones index, the S&P 500 and the Nasdaq index of technology stocks reached fresh highs on Wednesday, while the FTSE in London also hit a new record.

The Dow Jones surpassed 21,000 for the first time to reach 21,130, while FTSE 100 jumped almost 120 points to 7,382 on the day and more than 1,100 points higher – or 18% – on the same month a year ago.

Exchanges in Spain, Germany and France also saw steep rises in the value of listed shares as investors bet on a spending spree by the new Trump administration filtering out to increase the profits of large corporations across Europe.

In his most measured speech to date, Trump told Congress he would bring back to life dying industries and “crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our very, very beautiful land”.

He added: “My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. It will be a big, big cut. At the same time, we will provide massive tax relief for the middle class.”

The dollar jumped to a seven-week high on the expectations of a fresh stimulus from Washington and news that the US manufacturing sector maintained its recent strong run of expansion, pushing the pound down more than a cent to $1.23.

David Cheetham, chief market analyst at online trader XTB said Trump’s speech was the main trigger for the strong rally on Wall Street and especially his “commitment to tax reform and $1 trillion [£810bn] of infrastructure spending”.

But Mark Dampier, head of research at Hargreaves Lansdown, said figures showing the underlying strength of the US economy provided the markets with most of their momentum. He said US savers had huge sums of cash, but had been waiting for good news from the economy before investing. “People have been holding off and a lot of cash has been sitting on the sidelines. Now that cash is being put to work and pushing the market up,” he said.

Banking stocks were among the biggest risers alongside defence contractors and firms in a position to benefit from rising infrastructure spending, like the construction and mining equipment maker Caterpillar, which has seen a near-60% rise in its share price over the last year. The UK banking index rose 1.6% as Standard Chartered, HSBC and Barclays gained between 1.5% and 2.3%.

Miners helped the FTSE 100 as copper climbed to its highest level in nearly a week, on concerns about a shortage of supply and an upturn in manufacturing growth in top metals user China. Prices of other major metals such as aluminium, nickel and zinc were also higher.

The strength of the US economy also raised the prospect of an early interest rate rise, possibly following the Federal Reserve’s meeting later this month.

New York Fed president, William Dudley, an influential figure on the central bank’s open market committee and close ally of chair, Janet Yellen, said the case for tightening monetary policy “has become a lot more compelling”.

“In fact, prospects of significant fiscal spending could push more Fed members to the hawkish camp,” said Ipek Ozkardeskaya, analyst at London Capital Group, adding that traders were in a hurry to readjust Fed expectations.