Europe's STOXX 600 rose 0.5 percent, helped by gains in Daimler (DAIGn.DE) and Unicredit (CRDI.MI), while sterling GBP=D4 jumped 1.1 percent against the dollar, pulling further from a 31-year low hit last week.
In Britain, interior minister Theresa May was set to become prime minister on Wednesday, offering some relief from the political uncertainty that has dogged the market since the country voted to leave the European Union last month. [GBP/]
On Wall Street, the S&P 500 index .SPX hit a record closing high on Monday, extending gains after bumper U.S. job figures on Friday reduced worries about an economic slowdown.
"U.S. real interest rates are now negative. It is inconceivable that U.S. shares will crumble when real interest rates are negative," said Hisashi Iwama, a senior portfolio manager at DIAM.
Second-quarter earnings season, for which investor expectations are low, got off to a bright start with aluminum producer Alcoa (AA.N) beating estimates overnight.
In Europe, shares in Daimler jumped 3.8 percent after the German automaker posted encouraging results and reiterated its full-year outlook, allaying some concerns about the impact of Brexit.
Italian banks, a focus of investor concerns about Europe, got a boost on Tuesday with Unicredit jumping nearly 7 percent after the bank took steps to strengthen its capital position by selling a stake an online broker.
Earlier, Asian shares extended gains partly on expectations of more policy stimulus, particularly in Japan.
Japanese Prime Minister Shinzo Abe called for a fresh round of fiscal stimulus after a victory for his ruling coalition in upper house elections, sending the yen lower and stocks higher.
Traders in London said former U.S. Federal Reserve chief Ben Bernanke's presence in Tokyo had boosted expectations that the BOJ was preparing for more easing. The BOJ is still far from achieving its inflation target despite adopting negative rates earlier this year in addition to its asset buying program.
"The market is now priced for more than 10 trillion yen, but it will be more about the fiscal-monetary coordination that is driving markets," said Hans Redeker, head of currency strategy at Morgan Stanley.
The dollar rose 0.8 percent to 103.64 yen JPY=, its highest level since June 24, when the British referendum result roiled global markets. The euro jumped 1 percent to 114.93 yen EURJPY=R.
In commodities, oil prices recovered from two-month lows as a brief halt in Iraqi crude loadings threatened to tighten supplies. [O/R]
Brent crude LCOc1 was at $46.67 per barrel, up 43 cents or nearly 1 percent from its last close. U.S. West Texas Intermediate crude CLc1 was up 30 cents at $45.07 a barrel.
Prices of basic metals including zinc, aluminum and nickel got a boost after Goldman Sachs lifted its forecasts on expectations of tighter supplies in the second half of the year.
Source : Reuters