The euro tumbled on Tuesday and the region's stocks and bonds jumped after the European Central Bank suggested it may speed up its 1 trillion euro bond-buying campaign slightly to account for lower market liquidity in high summer.
World stocks were already testing all-time highs after another jump in Chinese stocks and a record close on Wall Street, and European markets shot up after top policymaker Benoit Coeure talked of adjusting the ECB's buying program.
He said the speed of the recent spike in bond yields, which has effectively wiped out the benefits of QE, was worrisome and said the ECB could "moderately" increase its buying in May and June to ensure it doesn't fall behind on its target over the summer.
The euro EUR= was back at $1.12 for the first time in a week and the FTSEurofirst 300.FTSE jumped 1.6 percent as gains of 1.9 and 2 percent on Germany's DAX .GDAXI and in Paris .FCHI outpaced a 0.4 percent rise on London's FTSE .FTSE.
Bond yields, which move inversely to prices, also tumbled, with those on 10-year German Bunds DE10YT=TWEB down 7 basis points and Italian and Spanish equivalents down 12 basis points.
"There is a sense the comments from the ECB indicate a growing push back against the sell-off in bond markets that's been in place for the past month or so, and a push back against both euro strength and market volatility," said Manik Narain, a UBS strategist.
The moves came ahead of German sentiment data from the ZEW institute at 0900 GMT that will be closely watched after some mixed signals from Europe's largest economy in recent weeks.
Fears of a Greek bankruptcy also rumbled in the background even as the country's top politicians vowed to conclude a cash-for-reform deal with its lenders.
"I think we are very close (to a deal) ... let's say in a week," Greek Finance Minister Yanis Varoufakis said in a TV interview on Monday night. "Another currency is not on our radar, not in our thoughts," he added.
FINE CHINA
China's surging stock market and a jump in the New Zealand dollar after a rise in inflation dominated attention overnight in Asia.
The CSI300 index .CSI300 surged 3.4 percent and the Shanghai Composite Index .SSECrose 3.0 percent, as investors welcomed Beijing's 2015 guidelines for economic reform.
They prioritized a further opening of the country's capital market and a restructuring of state enterprises.
"You need a vibrant stock market to push forward economic reforms, whether it's about asset securitization or industry consolidation," said Tian Weidong, analyst at Kaiyuan Securities in Xian. "With such a policy backdrop, investors are emboldened to stay in the market."
Japan's Nikkei .N225 also ended up 0.7 percent at a three-week high as the dollar .DXY nudged down the yen. JPY=
Expectations of more easing from the Bank of Japan kept the Japanese currency in check. The BOJ meets on Friday and is seen expanding its massive stimulus program in October, according to most economists polled by Reuters.
Among commodities, U.S. crude futures edged up after slipping on Monday on the stronger dollar and oversupply concerns triggered by a jump in Saudi Arabian exports
U.S. crude CLc1 rose about 0.1 percent in Asian trade to $59.48 a barrel, while Brent LCOc1 edged down 0.2 percent to $66.15.
Safe-haven gold XAU=, meanwhile, fell for the first time in six sessions, dropping about 0.3 percent to $1,218 an ounce. It had hit a three-month high a day early after disappointing U.S. economic data dented expectations of Federal Reserve rate hikes this year.
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