Asian stocks rose to their highest in nearly three months on Thursday, led by energy and financial shares, and oil climbed on hopes the U.S. economic slowdown may be easing.
Major European stocks were expected to open higher, with stock futures up 0.9 percent, as investors globally waded back into riskier assets and trimmed safety trades.
The U.S. dollar steadied against major currencies after tumbling overnight on comments from U.S. Treasury Secretary Timothy Geithner that he was open to expanding the use of the International Monetary Fund's special drawing rights, appearing to endorse an idea put forward by China.
Regional bonds were hit by stock market gains, while U.S. Treasuries steadied after falling on Wednesday on concerns that a planned surge in government debt supply to fund stimulus plans would exceed demand.
Strong U.S. housing and durable goods data fed a global equity rally that has persisted for nearly three weeks, based on scattered signs of stabilization and confidence the financial sector has seen its worst days.
The main factor holding the market up is increased optimism regarding an economic recovery later this year, said Shane Oliver, head of investment strategy at AMP Capital Investors on the stock market rally.
It remains to be seen whether we have seen the bottom or not, but the rally we've been seeing in the last few weeks probably still has a bit further to go, he added.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> gained for a fourth consecutive session and climbed 2.1 percent to the highest since January 8.
Japan's Nikkei average <.N225> finished 1.8 percent higher, with large exporters such as Canon Inc <7751.T> and Sony Corp <6758.T> among the biggest boosts to the index.
Hong Kong's Hang Seng index jumped 3.4 percent, propelled by a 13 percent gain in Industrial and Commercial Bank of China <1398.HK> after Goldman Sachs said it would extend the lockup on most of its stake in the firm.
An easing of concerns about the U.S. economy and its banks, plus hopes the U.S. government is getting to grips with toxic assets has fueled a rise of 18 percent in the MSCI ex Asia index so far this month.
But officials urged more global action.
Monetary and fiscal authorities have plenty of ammunition to combat the deepest downturn in decades and the measures already taken will be critical in driving a recovery, the presidents of the Federal Reserve banks of San Francisco and Cleveland said in separate remarks on Wednesday.
Chinese Finance Minister Xie Xuren said countries should increase their economic stimulus packages if need be to boost market confidence, while a senior IMF official warned the world economy will not start its recovery as expected in 2010 if countries withdraw fiscal stimulus too soon.
Geithner told policy makers and business executives at the Council on Foreign Relations that he was quite open to a Chinese suggestion to move toward greater use of SDRs, a basket of dollars, euros, sterling and the yen, used by the IMF.
Earlier this week, Chinese central bank governor Zhou Xiaochuan said the world should consider using the IMF's SDRs basket as a super-sovereign reserve currency.
But the dollar pared losses after Geithner reiterated that he expected the currency to remain the top reserve currency for a long time.
The dollars reaction to his comments demonstrates that even statements by a US Treasury Secretary who clearly has not yet worked out that he has to choose his words carefully cannot question the role of the dollar as reserve currency -- if for no other reason than lack of alternatives, said Commerzbank currency strategists in a note.
The euro was steady at $1.3585, having pulled back from Wednesday's high of $1.3653.
Increasing risk appetite is taking away some of the bid for safe-haven debt. But bonds are also being undermined by concerns of massive government supplies to fund stimulus plans.
U.S. Treasuries steadied on Thursday after yields reached their highest levels in a week on Wednesday following tepid demand in a record-large auction of five-year Treasury notes.
The U.S. Treasury is set to auction $24 billion of seven-year notes on Thursday, bringing the week's total issuance to a record $98 billion.
Benchmark 10-year Treasury notes traded steady at a yield of 2.81 percent.
New Zealand bonds fell sharply, sending yields as much as 35 basis points higher on the day as the central bank denied market speculation it would hold an emergency meeting to discuss a sharp spike in five-year bonds.
In commodity markets, U.S. oil prices advanced 1.1 percent to $53.35, while .