Stock markets recovered from early weakness on Tuesday as optimism about a fresh US economic stimulus package crept back into trading rooms.

Democrats and Republicans are battling to hammer out a new package to help the US economy recover from the ravages of the pandemic, with analysts pointing to reports claiming good progress has been made.

"There's a big desire from both parties to get some kind of stimulus passed. I think the market is expecting that," said Bob Phillips at Spectrum Management Group.

Worries are also receding over the trends in the coronavirus pandemic as some of the worst-hit US states are now starting to see new cases ebb.

"More and more investors believe that the worst is behind us with regards to the current wave of outbreaks, and that could mean that the most-affected sectors and small-caps might finally see sustained inflows and today's session could be the start of that trend," said Gorilla Trades strategist Ken Berman.

European stock markets ended the session higher with the exception of Frankfurt, which dipped.

Wall Street indices climbed following a choppy session, with the Nasdaq finishing at a fresh record, while gold prices scaled new heights, rising above $2,000 an ounce for the first time.

Prices for the precious metal have risen more than 30 percent this year as the coronavirus outbreak has weakened the economy and clouded the global financial outlook.

Earlier Tuesday, Asian stocks rallied on the back of Wall Street's strong performance on the day prior.

Analysts are also monitoring ongoing tensions between the United States and China, exacerbated most recently in the fight over video-sharing app TikTok.

China accused Washington of "bullying" after President Donald Trump ramped up pressure for its US operations to be sold to an American company, saying he will block the app domestically on September 15 unless it is sold.

Trump also said the US should receive a share of the deal, drawing criticism from legal experts who likened the demand to racketeering.

Among individual companies, Ford rose 2.5 percent after announcing that Jim Hackett would resign as chief executive and be replaced by longtime auto executive Jim Farley.

House of Representatives Speaker Nancy Pelosi said some progress had been made in stimulus talks, and while both sides are far apart on some issues, markets expect a deal will eventually be done House of Representatives Speaker Nancy Pelosi said some progress had been made in stimulus talks, and while both sides are far apart on some issues, markets expect a deal will eventually be done Photo: AFP / MANDEL NGAN

New York - Dow: UP 0.6 percent at 26,828.47 (close)

New York - S&P 500: UP 0.4 percent at 3,306.51 (close)

New York - Nasdaq: UP 0.4 percent at 10,941.17 (close)

London - FTSE 100: UP 0.1 percent at 6,036.00 (close)

Frankfurt - DAX 30: DOWN 0.4 percent at 12,600.87 (close)

Paris - CAC 40: UP 0.3 percent at 4,889.52 (close)

EURO STOXX 50: UP 0.2 percent at 3,254.29 (close)

Tokyo - Nikkei 225: UP 1.7 percent at 22,573.66 (close)

Hong Kong - Hang Seng: UP 2.0 percent at 24,946.63 (close)

Shanghai - Composite: UP 0.1 percent at 3,371.69 (close)

Euro/dollar: UP at $1.1798 from $1.1762 at 2100 GMT

Dollar/yen: DOWN at 105.64 yen from 105.95 yen

Pound/dollar: DOWN at $1.3060 from $1.3075

Euro/pound: UP at 90.33 pence from 89.96

West Texas Intermediate: UP 1.7 percent at $41.70 per barrel

Brent North Sea crude: UP 0.6 percent at $44.43 per barrel