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The dollar held on to big gains on Wednesday before minutes of the US Federal Reserve's latest meeting, while European shares followed Asian stocks higher.
Relative calm in the standoff between the United States and North Korea also lifted investors' appetite for riskier assets.
Metals markets were buoyant, with the prices of zinc, used to galvanise steel, hitting its highest in a decade on Chinese infrastructure demand. European shares rose half a per cent in early trade.
Fed policy minutes
The Fed releases the minutes of its July policy meeting at 1800 GMT, after European markets have closed, and will be pored through for clues to how the debate over the policy outlook is developing.
The US central bank had kept interest rates unchanged last month and said it expected to start winding down “relatively soon” its massive holdings of bonds, bought in an effort to boost the economy.
The pan-European STOXX 600 index rose 0.7 per cent, led by basic resources companies and energy companies as metals and oil prices rose. Germany's DAX index rose 0.8 per cent and Britain's blue-chip FTSE 100 gained 0.6 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.3 per cent. South Korea's KOSPI index, reopening after a holiday on Tuesday, ended the day 0.6 per cent higher.
North Korea respite
North Korean leader Kim Jong Un has delayed a decision on firing missiles towards the US Pacific territory of Guam while he waits to see what the United States does, the North's state media reported on Tuesday. The United States said any dialogue was up to Kim.
NAFTA trade pact
Japan's Nikkei lost 0.1 per cent, with some investors unnerved by the possible impact on Japanese carmakers of talks beginning on Wednesday between the United States, Canada and Mexico intended to modernise the North American Free Trade Agreement.
Data on Tuesday, showing US retail sales recording their biggest increase in seven months, slightly boosted market expectations the Fed will raise rates for a third time this year, and lifted US government bond yields and the dollar.
The US currency was barely changed on Wednesday against a basket of major peers but held close to three-week highs hit on Tuesday.
“The North Korea missile fears seems to be abating for now and if the recent bunch of strong US data translates into higher inflation, then markets will start pricing more interest rate increases from the Fed in the coming months,” said Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt.
ECB policy meeting
The euro traded flat at $1.1733. It fell earlier to as low as $1.1690 after a Reuters report, citing two sources familiar with the situation, that European Central Bank chief Mario Draghi would not deliver a new policy message at next week's gathering of central bankers in Jackson Hole, Wyoming.
Many in markets have been expecting Draghi to start charting a course out of the ECB's stimulus programme.
The yen, which rose as tension over the Korean peninsula intensified last week, fell 0.2 per cent to 110.91 per dollar. Sterling traded 0.2 per cent stronger at $1.2891, rising almost half a cent after data showed UK wages rising faster than expected in the three months to June.
Ten year US Treasury yields were 1.4 basis point higher at 2.28 per cent, having touched a one-week high of 2.28 per cent on Tuesday. German equivalents rose 2.2 bps to 0.45 per cent.
Zinc, oil
Zinc rose almost 2 per cent to as high as $3,018 a tonne, its highest since late 2007. Copper rose 1 per cent to $6,444 a tonne.
“There (was) a fair level of scepticism at the start of the year when China's infrastructure projects were announced but we're seeing much better-than-expected growth in fixed asset investment,” said analyst Daniel Hynes of ANZ in Sydney.
“That resetting of expectations is resulting in that much more positivity to the sector.”
Gold fell with the dollar relatively strong before the Fed minutes. It last stood at $1,270 an ounce, down 0.1 per cent. Brent crude oil rose 45 cents to $51.26 a barrel on a reduction in US stockpiles.
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