Global stock markets held their ground on Tuesday as investors shrugged off concerns of higher interest rates in the face of high inflation, even as tensions over Ukraine linger.

Wall Street equities closed higher for the third straight session, with the broad-based S&P 500 ending with a 0.7 percent increase.

The main European markets closed in positive territory, taking their lead from gains in Asia.

Jitters surrounding the Federal Reserve's policy pivot to confront inflation pressures have whipsawed equities in recent weeks. Central bankers have signaled the first rate hike since 2018 will likely come in March, but the pace of the increases remains unclear.

Investors also have been watching the diplomatic duel with Russia over Ukraine, as well as the ongoing impact of the Covid-19 pandemic, which has tangled supply chains worldwide.

There was a sense that the sell-off in January may have gone too far.

"So far we experienced a small rally off deeply oversold conditions," Adam Sarhan of 50 Park Investment told AFP.

But he cautioned that performance in coming days will depend on how investors react to corporate results and the key US employment data Friday.

"A few weeks ago... the market had a big sell off and rallied for one or two days, and then kept on falling."

Oil prices rose modestly as the world's top crude-producing countries prepare to meet Wednesday to discuss a further increase in output.

Sydney shares ended in positive territory on Tuesday as the Australian central bank decided against raising interest rates to battle inflation, and instead announced the end to its bond-buying stimulus from next week.

Traders are now awaiting policy decisions by the Bank of England and European Central Bank due Thursday.

With US inflation at a 40-year high, economists expect the Fed to raise rates multiple times this year starting at its March meeting, and one official said an aggressive half-point increase is an option.

But a member of the central bank's policy setting committee on Monday said rate hikes may not need to be as aggressive if the central bank sells off its bond holdings more quickly.

"Investors should not lose sight of the fact that the economy remains strong, which should limit downside from current levels," said Solita Marcelli at UBS Global Wealth Management.

Stocks have been under pressure as the Federal Reserve has shifted policy and signalled a likely interest rate hike in March
Stocks have been under pressure as the Federal Reserve has shifted policy and signalled a likely interest rate hike in March AFP / TIMOTHY A. CLARY

Business was thin across Asia Tuesday owing to the Chinese New Year break that saw Hong Kong, Shanghai, Singapore, Seoul, Taipei, Manila and Jakarta closed.

New York - Dow: UP 0.8 percent at 35,405.24 (close)

New York - S&P 500: UP 0.7 percent at 4,546.54 (close)

New York - Nasdaq: UP 0.8 precent at 14,346 (close)

London - FTSE 100: UP 1.0 percent at 7,535.78 (close)

Frankfurt - DAX: UP 1.0 percent at 15,619.39 (close)

Paris - CAC 40: UP 1.4 percent at 7,099.43 (close)

EURO STOXX 50: UP 0.9 percent at 4,214.04 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 27,078.48 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.1269 from $1.1235 late Monday

Pound/dollar: UP at $1.3519 from $1.3445

Euro/pound: DOWN at 83.33 pence from 83.54 pence

Brent North Sea crude: UP 0.1 percent at $89.35 per barrel

West Texas Intermediate: UP 0.3 percent at $88.38 per barrel