London: World stocks floated below year highs on Tuesday, extending a year-end rally with Britain’s FTSE rising to pre-Lehman levels. Wall Street looked set to join in with gains at the open.

Losing ground: The euro and higher yielding currencies such as the Australian dollar rose against the US dollar on Tuesday. Hemant Mishra/Mint

The dollar was weaker, 10-year euro zone government bond yields hit 6-week highs and the cost of insuring European company debt through credit default swaps fell to a year low.

MSCI’s all-country world stocks index was up about a third of a per cent. It was around half a per cent below its 2009 high, reached on 3 December.

The index has gained some 32% this year and is up nearly 75% from a low on 9 March 9. This has come as investors have put worries about a major world financial collapse behind them.

European shares gained, with the FTSEurofirst 300 up 0.4%, rising for the sixth consecutive session.

“Europe is up some more today, but obviously volumes are very low, with most traders away from their desk. We expect there to be low volume sessions right up until the New Year," said Manoj Ladwa, senior trader at ETX Capital.

Earlier, Japan’s benchmark Nikkei spent much of the day in negative territory before edging up a mere 3.83 points at 10,638.06.

But it did hit a fresh four-month intraday high of 10,683.12 in early trade.

“Investors seem to be using the last days of this year to search for theme stocks—companies connected to emerging markets, which are likely to remain strong next year, as well as resource-linked shares," said Noritsugu Hirakawa, a strategist at Okasan Securities.

The euro and higher yielding currencies such as the Australian dollar rose against the US dollar on Tuesday, lifted by improved appetite for risk as equities gained ground.

Volumes were thin, however, and analysts were wary of drawing too many conclusions from intraday movements.

European shares rose 0.3% as investors remained in optimistic mood going into the year-end to keep the euro and perceived riskier currencies supported.

“With so little in the way of data and not many people around the market has gone back to what it is familiar with and is trading on the back of stronger risk appetite, which is pushing the euro and higher-yielding currencies higher," said Christian Lawrence, currency strategist at RBC Capital Markets. Against the yen, the dollar stayed supported, hovering close to a two-month high on the view that the US economy is recovering well, which has lifted US treasury yields.

Jessica Mortimer contributed to this story.