LONDON: European shares rose and bond yields fell on Tuesday on hopes that a possible snap election in Japan might lead to more economic stimulus measures and that Germany's ZEW survey would be upbeat.
Investor sentiment was also lifted by comments from European Central Bank chief Mario Draghi on Monday that he was ready to do more to fight deflation.
Investors were also betting that the ZEW survey for November, due out at 1000 GMT, would show some signs of stabilisation in Europe's biggest economy and reverse 10 straight months of decline.
"There has been a lot of disappointment on the ZEW in the past few months, and this time people expect to see some sort of stabilisation at least," IG France chief market analyst, Alexandre Baradez, said.
"Overall sentiment has improved after Draghi's comments yesterday, which were quite dovish even though he didn't unveil anything new."
The pan-European FTSEurofirst 300 equity index was up 0.4 percent by 0841 GMT, compared with a 2.2 percent rise for Japan's Nikkei index. The MSCI All-Country World index was up 0.3 percent, marking a gain of about 8.6 percent since its lows in October.
Fears over global growth, exacerbated by Japan's sinking into recession in the third quarter, have kept the spotlight on policymakers' capacity to do more to avert deflation.
Draghi's comments on Monday mainly reiterated a previous stance that the ECB was ready to do more if inflation remained too low for too long. That pushed euro zone bond yields a touch lower, though the euro was slightly firmer against the dollar.
"We still have some spillover from yesterday's comments from Mario Draghi," Bayerische Landesbank chief strategist for global interest rates, Marius Daheim, said.
The picture was more mixed in emerging markets. Stocks lost ground and tracked Asian markets outside of Japan, where the mood had soured over downbeat Chinese house prices. Dollar-denominated assets in Russia were up, bucking the trend.
Oil prices were broadly flat, with Brent crude hovering at just above $79 per barrel while U.S. crude traded at $75.65.
The airline sector, up recently thanks to falling oil prices, was in focus after low-cost carrier easyJet said it was positioned to deliver further growth.
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