World stocks got off to a solid start in the second quarter, as reassuring remarks by the head of the Federal Reserve and stronger-looking emerging markets helped to keep their recent rally alive.
A flurry of merger-and-acquisition activity gave European bourses .FTEU3<0#.INDEXE> a 0.3 percent boost on Tuesday, putting them on track for a sixth straight day of gains after they faltered in February and March. .EU0#.INDEXE>
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Major currencies and bonds continued their cautious jockeying before this week's European Central Bank meeting and U.S. jobs data.
Global shares were also supported by Fed Chair Janet Yellen, who reinforced the need for an "extraordinary" commitment to support the U.S. economy. That appeared to reduce the chances interest rates would rise sooner than had been expected.
The safe-haven Japanese yen eased as Japan's sales tax went up, although Yellen's comments meant the dollar slipped against the euro and sterling.
The euro was off its recent lows at $1.3790 at 0920 GMT. But it remained constrained by talk that the European Central Bank, which meets on Thursday, may have to cut interest rates again to keep inflation from slowing further.
Worryingly for policymakers, Markit's Purchasing Managers' Index on Tuesday showed that despite growth in all corners of the euro zone, companies have resumed cutting prices to drum up business.
After a similar warning by the IMF on Monday, EU Economic and Monetary Affairs Commissioner Olli Rehn said he was worried about decelerating inflation, at a meeting of EU finance ministers in Athens.
"I am concerned about a possibility of having a prolonged period of low inflation in the euro zone, because this would negatively affect the rebalancing process of the euro zone economy," he told reporters.
Asian stocks .MIAPJ0000PUS climbed to a four-month high overnight as a rebound in emerging markets helped to offset a minor slip by Japan's Nikkei .N225, subdued by the prospect of new taxes cooling the economy.
Investors are buying back emerging-market assets after a bruising start to the year caused by worries about a reduction in U.S. central bank stimulus, pockets of political instability and China's slowing economy.
MSCI's main EM index .MSCIEF was at a three-month high, having outperformed the
S&P 500 .SPX in recent weeks. Calm in Crimea also saw Russia's ruble and main stock market climb to their highest since February.
More lackluster Chinese data also bolstered talk of Beijing bringing in selective stimulus.
"I don't belong to the doom and gloom brigade on China," said Nick Beecroft, chairman and senior market analyst at Saxo Capital Markets. "I think there is a longer-term rebalancing taking place and there is already talk of various stimulus measures if there is any significant slowdown in the economy."
Growing risk appetite undermined lower-risk assets that drew investors last month, at the height of the Ukrainian crisis.
German government bonds lost ground in early European trade as Italian and Spanish yields dipped back towards their historical lows.
Gold dropped to a seven-week low of $1,278.34 per ounce, despite Yellen's dovish comments.
The yen slipped to a three-week low against the dollar of 103.44 yen and a nine-month low against the risk-sensitive Australian dollar.
Crude oil futures were off three-week highs following news Russia was withdrawing some troops from the Ukrainian border. U.S. crude futures stood at $101.31 per barrel, off Friday's high of $102.24.
Copper prices hovered just off a three-week high.
"It's generally accepted that the Chinese economy is on a slowing trajectory," said James Glenn of National Australia Bank in Melbourne. "(But) we expect global demand to pick up gradually over 2014 as the advanced economies start to see some improvement."
(Additional reporting by Melanie Burton in Sydney; Editing by Larry King)