LONDON: World stocks rose on Tuesday, as investors anticipated the U.S. Federal Reserve and other central banks meeting this week will keep policies accommodative to help drive a post-pandemic global economic recovery.
European shares extended a rally that began on Wall Street on Monday and continued into Asia, with the pan-region STOXX 600 index up 0.5per cent. On Monday, the index touched its highest level in more than a year before ending flat.
Britain's FTSE 100 index rose 0.7per cent, Germany's DAX 0.6per cent, France's CAC 40 0.2per cent and Italy's FTSE MIB index 0.6per cent.
E-mini futures for the S&P 500 hit a record high before trading flat on the day.
MSCI's All Country World Index, which tracks stocks across 49 countries, rose 0.2per cent to its highest levels since Feb 25.
An index of Asia-Pacific share markets excluding Japan gained 0.65per cent, led by a 0.8per cent jump in Australia's benchmark S&P/ASX 200 index.
Japan's Nikkei 225 gained 0.5per cent to just below the 30,000 mark. The broader Topix added 0.65per cent.
China's blue-chip CSI 300 index climbed 0.87per cent and Hong Kong's Hang Seng gained 0.67per cent.
"The stock markets have kept their spirits up ahead of tomorrow's important Fed announcement," said Karl Steiner, chief quantitative strategist at SEB.
On Monday, the S&P 500 and Dow Jones Industrial Average both soared on gains in travel stocks as mass vaccinations in the United States and congressional approval of a US$1.9 trillion aid bill fueled investor optimism.
Longer-term U.S. Treasury yields slipped further on Tuesday, as the market looked ahead to government debt auctions and the Fed's two-day policy meeting, which will conclude on Wednesday.
The benchmark 10-year yield, which reached a more than one-year high of 1.642per cent last week, was back at 1.6004per cent.
The earlier surge in yields stemmed from investors speculating that rising inflation expectations could prompt the Federal Open Market Committee to signal it will start raising rates sooner than expected.
"We think the FOMC will have a hard time expressing concern about asset markets with the S&P at an all-time high on 12 March, despite 10Y U.S. Treasury yields at post-February 2020 highs," said analysts Steve Englander and John Davies at Standard Chartered.
"Focus has been on the FOMC ‘dot plot’ in recent days, but if the FOMC and Fed Chair (Jerome) Powell do not push back against current yield levels, investors are likely to take yields higher as better data arrives."
Graphic: Federal Open Market Committee Projections - https://fingfx.thomsonreuters.com/gfx/mkt/xlbpgxblxvq/Pastedper cent20imageper cent201615887311998.png
Fed policymakers are expected to forecast that the U.S. economy will grow in 2021 by the fastest rate in decades, as it recovers from a coronavirus-stricken 2020.
The Bank of England also meets this week on Thursday and the Bank of Japan wraps up a two-day meeting on Friday.
On Wall Street, the Dow Jones Industrial Average rose 174.82 points, or 0.53per cent, to 32,953.46, the S&P 500 gained 25.6 points, or 0.65per cent, to 3,968.94 and the Nasdaq Composite remained unchanged.
Airline shares rose as the companies pointed to concrete signs of an industry recovery as vaccine rollouts help spur leisure bookings.
The outlook for post-pandemic recoveries continued to diverge between the U.S. and Europe.
President Joe Biden's order to make vaccination available to all adults by May 1 contrasted with stuttering rollouts in Germany, France and elsewhere, where use of the AstraZeneca vaccine has been suspended amid concern over possible side effects.
However, Kyle Rodda, an analyst at IG Markets, said the prospect of a slower economic recovery in Europe didn't appear to be a major handicap for investors.
"It doesn't seem to be the view that this is a real risk," he said. "Investors are wary, but not worried."
In currencies, the U.S. dollar held small gains from overnight, with caution evident ahead of the central bank meetings.
The dollar was largely flat at 109.19 yen, after rising as high as 109.365 on Monday for the first time since June.
The euro was little changed at US$1.1930, holding for an eighth session below the US$1.20 level.
Bitcoin halted its slide from a record high of US$61,781.83 reached on Saturday, last trading 1per cent higher on the day around US$56,250.
U.S. West Texas Intermediate crude for April changed hands at US$64.74 a barrel, down 1per cent. Brent crude futures for May stood at US$68.22 a barrel, losing 1per cent.
(This story corrects U.S. 10-year Treasury yield to 1.6004per cent)
(Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland and Kane Wu in Tokyo; editing by Larry King)