European stocks mostly rose Wednesday on hopes that the Federal Reserve would announce more stimulus measures, while investors shrugged off news that North Korea had launched a long-range rocket.
Markets also digested news that a Greek debt buy-back scheme designed to release much needed EU-IMF bailout funds appears to have progressed smoothly.
In afternoon deals, London's FTSE 100 advanced 0.21 percent to 5,937.70 points and Frankfurt's DAX 30 gained 0.30 percent to 7,6612.68 points while the Paris CAC 40 eased 0.13 percent to 3,641.58.
Milan's FTSE Mib benchmark increased by 0.81 percent and Madrid's IBEX 35 advanced 0.65 percent.
In foreign exchange activity, the European single currency climbed to $1.3041, down from $1.3003 late in New York on Tuesday. Gold prices firmed to $1,712.50 an ounce on the London Bullion Market, from $1,710 on Tuesday.
In New York, US stocks opened higher on anticipation of Fed support for the sluggish US economy.
The Dow Jones Industrial Average climbed 0.28 percent, the S&P 500-stock index advanced 0.29 percent and the tech-rich Nasdaq Composite 0.33 percent.
The central bank's Federal Open Market Committee is due to announce its monetary policy update at 12:30 pm (1730 GMT).
"Wall Street is speculating the Fed will replace the expiring Operation Twist program with a fresh round of Treasury purchases," said Karee Venema of Schaeffer's Investment Research.
Analyst Chris Beauchamp at trading group IG noted that "such a move would be a welcome distraction for markets bored by the political brinksmanship being played out in Washington."
The Fed's policy committee is set to decide on what action to take as the end approaches of its policy of selling short-term debt to buy longer-term debt.
There are expectations that policymakers will replace it with more outright bond purchases, or "quantitative easing", aimed at lowering interest rates to encourage businesses to invest and hire.
Asian equities also rose as dealers welcomed signs of progress in talks on the US fiscal cliff and upbeat data from Germany and Spain, and despite North Korea's rocket launch.
With investors becoming more confident the safe-haven yen came back under pressure ahead of a general election in Japan on Sunday and expectations of more monetary easing by the country's central bank.
In Paris, shares in carmaker PSA Peugeot Citroen, struggling with financial problems and a restructuring, leapt by 8.48 percent to 5.347 euros on a newspaper report that Algeria might be interested in acquiring a shareholding.
In Asia, Tokyo shares rose 0.59 percent, Hong Kong added 0.80 percent, Shanghai was 0.39 percent higher and Sydney climbed 0.17 percent to a 17-month high.
US President Barack Obama and Republican House Speaker John Boehner have swapped new offers to avoid the fiscal cliff of huge tax hikes and spending cuts due to come into effect on January 1, according to sources on both sides.
It fuelled hopes that the two, who have been at loggerheads over plans to increase taxes on the rich and slashing aid to Medicare, could come to an agreement.
If a deal is not reached by the New Year, the package currently in place is widely expected to send the economy into recession.
Sentiment was also buoyed this week by positive numbers from Germany, where investor sentiment in Europe's economic engine hit a seven-month high on hopes that it will dodge recession.