* U.S. Senate approves major tax cuts in victory for Trump
* Dow industrials, S&P 500 hit all-time highs
* Dollar strengthens against currency basket
* Oil prices ease as market eyes U.S. output (Updates with afternoon trading)
By Lewis Krauskopf
NEW YORK, Dec 4 (Reuters) - Global stock markets rose on Monday, along with the dollar and Treasury yields, after a major U.S. tax overhaul cleared an important hurdle.
Markets reacted strongly to the U.S. Senate's approval on Saturday of the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing taxes on businesses.
On Wall Street, the benchmark S&P 500 and Dow industrials rose to record highs, while MSCI's gauge of stocks across the globe gained 0.48 percent and hit an all-time peak.
“The big story is indeed the tax reform passage. Until fairly recently, markets were pretty skeptical about whether anything was actually going to happen," said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.
"This can have a meaningful impact on corporate earnings here in the U.S. So you are largely seeing a repricing of the U.S. markets based on that," McMillan said.
The Republicans' tax plan is expected to add $1.4 trillion over 10 years to the $20 trillion national debt to finance changes that they say would further boost an already growing economy.
By mid-afternoon, the Dow Jones Industrial Average rose 199.59 points, or 0.82 percent, to 24,431.18, the S&P 500 gained 14.62 points, or 0.55 percent, to 2,656.84 and the Nasdaq Composite dropped 11.57 points, or 0.17 percent, to 6,836.02.
Some of the biggest gainers were from areas expected to benefit from a lower corporate tax rate. The S&P 500 banks index surged 3.0 percent, while the Dow Jones Transport Average jumped 2.8 percent.
"Financials should benefit from not only tax reform but as we start to see rates move higher, their interest margins become more profitable," said Emily Roland, head of investment research at John Hancock Investments in Boston.
Aetna shares slipped 0.8 percent after drugstore chain operator CVS Health agreed to buy the health insurer for $69 billion. CVS shares fell 4.8 percent.
In Europe, the pan-European FTSEurofirst 300 index rose 0.97 percent.
Gains in the dollar helped Germany's dollar-exposed DAX leap from a two-month low, up 1.5 percent.
The dollar rose against a basket of currencies after the tax package moved forward.
The dollar index rose 0.37 percent, with the euro down 0.34 percent to $1.1849. The Japanese yen weakened 0.58 percent versus the greenback at 112.78 per dollar.
"Dollar bulls are pinning their hopes on the sweeping tax deal leading to a more rapid pace of interest rate hikes from the Federal Reserve," said Jake Spark, U.S. corporate hedging manager at Western Union Business Solutions, in Washington.
Benchmark 10-year notes last fell 6/32 in price to yield 2.383 percent, from 2.363 percent late on Friday.
Oil fell on profit-taking as the market eyed signs of rising U.S. production, though prices remained close to recent two-year highs thanks to last week's decision by OPEC and other producers to extend output cuts.
U.S. crude fell 1.56 percent to $57.45 per barrel and Brent was last at $62.59, down 1.79 percent on the day.
Gold prices fell toward the roughly four-week lows hit last week as the dollar strengthened.
Spot gold dropped 0.5 percent to $1,274.11 an ounce.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York, Sruthi Shankar and Rama Venkat Raman in Bengaluru, Sujata Rao in London; Editing by Mark Heinrich and Dan Grebler)