A global equities gauge rose on Wednesday for a third day in four as bets on more economic stimulus overcame, for now, worries over the rising prospect of a global recession.
The flattening of the curve between 2-year and 10-year U.S. Treasury debt, however, loomed as an inversion is seen as a harbinger for an economic contraction.
Strong earnings in the United States and the report of talks on a mega merger in European autos triggered gains in stocks, and the improved risk sentiment drove safe-haven yields higher while the yen and gold edged lower.
There was muted reaction across markets to minutes from the late July meeting at the Federal Reserve. Policymakers debated cutting interest rates more aggressively than the quarter-point cut last month, while showing broad concern over a global economic slowdown and trade tensions.
The trade war escalated further after that Fed meeting and investors were cautious about the current validity of their comments.
"It's really old news. This is from the July meeting and what (Fed Chairman Jerome) Powell has to say on Friday is going to be much, much more important than these minutes," said Mary Ann Hurley, vice president in fixed-income trading at D.A. Davidson in Seattle.
Traders expect that the Fed's annual Jackson Hole symposium and a Group of Seven summit this weekend will shed light on the next steps policymakers will take to support economic growth.
Auto shares led European stocks higher after Italian media suggested the merger talks between Fiat Chrysler and Renault have continued despite reports to the contrary.
In U.S. equities, earnings from Target and Lowe's boosted consumer-centered stocks and overall market sentiment.
The Dow Jones Industrial Average rose 214.02 points, or 0.82%, to 26,176.46, the S&P 500 gained 19.59 points, or 0.68%, to 2,920.1 and the Nasdaq Composite added 57.64 points, or 0.73%, to 8,006.20.
The pan-European STOXX 600 index rose 1.21% and MSCI's gauge of stocks across the globe gained 0.59%.
Emerging market stocks rose 0.36%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.15% lower, while Japan's Nikkei lost 0.28%.
Yields Rise, Yen Falls
Futures markets have fully priced a 25-basis-point cut in next month's Fed meeting. On Wednesday, U.S. Treasury yields rose as rising stock prices reflected improving risk sentiment.
Benchmark 10-year notes last fell 6/32 in price to yield 1.5791%, from 1.559% late on Tuesday.
Germany sold 30-year bonds with a negative yield for the first time at an auction on Wednesday, a milestone for a fixed-income market where the entire curve now yields less than zero. The very weak demand seen at the auction was expected.
West Texas crude futures fell after U.S. government data showed a drawdown in domestic crude stockpiles but rises in refined product inventories, while worries about a possible global recession capped gains in Brent.
U.S. crude fell 0.89% to $55.63 per barrel and Brent was last at $60.22, up 0.32% on the day.
In currencies, the dollar rose against the Swiss and Japanese safe-haven currencies and the dollar index rose 0.11%, with the euro down 0.14% to $1.1083. Sterling was last trading at $1.2123, down 0.37% on the day.
The Japanese yen weakened 0.35% versus the greenback at 106.61 per dollar.
Spot gold dropped 0.4% to $1,501.26 an ounce.