Shares rose and the dollar steadied at new highs on Wednesday, with overnight gains by Wall Street tech champions helping balance concerns that new restrictions to counter coronavirus infections will hurt the economic recovery.
Renewed hopes of stimulus measures in Europe also came into play after surveys of private sector economic activity in September painted a gloomy picture for the region, with rising Covid-19 infections leading to a downturn in services.
MSCI's world equity index, which tracks shares in 49 countries, was 0.3% higher, while the pan-European STOXX 600 benchmark progressively extended opening gains to rise 1.3%.
Technology shares were among the strongest gainers from the start in Europe following a rally overnight in US heavyweights Amazon, Microsoft, and Apple, and a positive performance earlier of peers in Asia. Tech companies have been rare beneficiaries of lockdown measures, with more people working and shopping from home.
A rebound in beaten-down sectors provided extra support.
Nasdaq futures meanwhile built on Tuesday's strong bounce to gain 0.2%. S&P 500 futures were 0.4% higher.
Carlo Franchini, head of institutional sales at Banca Ifigest in Milan, said that despite the gains the underlying mood remained highly cautions given uncertainty linked to the pandemic and its effect on the recovery.
"The US is the only market that's riding on. Investors are interested only in big US tech, even though they should look elsewhere if they took fundamentals into account," he said.
"Cornonavirus is a Damocles' sword for markets. If we continue with uncertainty over a possible vaccine, it's going to be a problem."
UBS Asset Management said on Wednesday that an emergency approval of one to three Covid-19 vaccines was likely in the coming months, a milestone that could finally end the surge of mega-cap US tech stocks.
Purchasing managers' (PMI) surveys showed euro zone activity growth ground to a halt this month, throwing the recovery into question, as fresh restrictions to quell a resurgence in coronavirus infections sent the services industry into reverse.
"It seems a W-shaped economic projection might be developing following the brief bounce in PMI numbers over the summer," said Charles Hepworth, Investment Director at GAM Investments.
"What this means is that continued stimulus across the euro zone will be hopefully forthcoming -- or at least that's what markets are placing their bets on," he added.
In Britain, the recovery from the coronavirus lockdown lost some momentum this month, according to a PMI survey taken before Prime Minister Boris Johnson announced a new round of restrictions that could probably last six months.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% for its first gain this week, but the mood was hardly bullish. Japan's Nikkei returned from a two-day holiday to slip 0.1%.
In foreign exchange markets, the standout mover was the dollar, which surged to its highest level since July 27 against a basket of six major currencies before paring those gains to trade flat.
"Risk-aversion on the back of new Covid-19 infections affecting Europe more directly remains an important factor this week," UniCredit strategists said in a note.
"This means that the USD is likely to remain firm in its role as preferred safe-haven currency," they added.
The euro was flat after rebounding from a two-month low hit on concerns about coronavirus infections and after the tepid European surveys.
Commodities were weighed down by the robust dollar and worries linked to the economic impact of a second wave of Covid-19.
Gold touched a six-week low as the dollar strengthened. Spot gold was last down 0.3% to $1,893.8 per ounce.
Oil managed to reverse course and turn positive, helped by a report saying US fuel inventories fell.
Brent crude futures were last up 0.5% at $41.91 a barrel and US crude futures slipped 0.3% to $39.92.
Italy's 30-year bond yield fell to a record low of 1.76% as the country's debt remained supported after local elections reduced the risk of a snap national poll.
US bonds fell, with the yield on benchmark 10-year US debt up 1.3 basis point at 0.6773%.