World stocks hit a fresh 28-month high on Tuesday, while the euro climbed on hopes for an easing of the euro zone debt crisis.

Euro zone leaders were attempting to thrash out an agreement on beefing up a rescue plan for indebted countries although no sign of agreement at Monday's meeting. Russia said it may be interested in buying bonds from the rescue fund, the European Financial Stability Facility (EFSF).

The euro rose more than half a percent to $1.3376.

Investors are keen to see euro zone countries provide more money for the EFSF to ensure that there is enough to cover any contagion into large economies such as Spain.

Analysts in a Reuters poll expected euro zone policymakers to increase the firepower of the EFSF by 260 billion euros to reach 700 billion euros.

It appeared, however, that EU ministers would not come up with a new package until leaders' meetings in February or even March. Investors have nonetheless been stepping back from their worst case scenarios vis-a-vis the crisis.

Players are not too keen to push the euro much lower, said Paul Mackel, director of currency strategy at HSBC. I am not too sure if it has the legs to test recent highs given all the uncertainty surrounding talks on the euro zone safety fund.

Euro zone government bonds sold off slightly, lifting yields.


World stock markets, in the meantime, were relatively oblivious to the euro zone debate, focusing on signs of greater global economic growth and positive earnings reports.

MSCI's all-country world index <.MIWD00000PUS> hit a new high, touching levels last seen in late August 2008. It was up 0.9 percent on the day.

Developed markets outperformed emerging bourses, continuing recent trends. Attention has shifted among some investors toward recovering developed economies and away from emerging markets, which as seen as a slightly crowded trade.

Goldman Sachs told an investor conference on Monday, for example, that it expected U.S. and Japanese stocks to outperform in the first half of 2011, with European and emerging stocks taking over in the second.

The FTSEurofirst 300 <.FTEU3> was up 0.8 percent, at a 28-month high.

The markets are waiting for an opportunity to move ahead rather than looking for an opportunity to take profits, said Mike Lenhoff, chief strategist at Brewin Dolphin.

The backdrop is still very supportive. This week is a very big week for corporate earnings in the U.S. and on balance, the results should be quite good.

Japan's Nikkei <.N225> earlier closed up 0.15 percent.

(Additional reporting by Anirban Nag and Atul Prakash, editing by Mike Peacock)