(Deletes reference to Nikkei. Tokyo market was closed for aholiday)
* Upbeat earnings activity boosts U.S. and European shares
* Euro falls on below-forecast German inflation data
* Draghi cools ECB QE talk; Fed begins policy meeting
By Richard Leong
NEW YORK (Frankfurt: HX6.F - news) , April 29 (Reuters) - World stock indexes rose onsolid company earnings on Tuesday, while the euro slipped asweaker-than-expected German inflation data kept alive chances ofmore stimulus from the European Central Bank.
Worries about Ukraine moved to the back burner after theUnited States and the European Union imposed more sanctions onRussia for its role in backing the separatist movement ineastern Ukraine.
Relief that the West's broadened sanctions on Moscow werelimited encouraged some investors to step back into stocks andother risky assets while paring holdings in the traditional safehavens of gold and U.S. and German government debt.
Yields on U.S. and German benchmarks edged up to 2.69 percent and 1.50 percent, respectively. U.S.bond yields also were affected by the $12 billion in bond supplyfrom iPhone maker Apple, which enticed huge orders,according to Thomson Reuters (Frankfurt: TOC.F - news) unit IFR.
Oil prices rebounded a day after posting their biggest fallin a month as traders focused on the violence in eastern Ukraineand a possible delay in U.S. relaxation of sanctions on Iranlater this year.
Equities drew the most investor attention on Tuesday, withshares in Europe rising more than 1 percent and Wall Streetindexes also rising, though less dramatically.
"The Ukraine situation played an important role here. Thetension there has been diffused for now," said Robbert VanBatenburg, director of market strategy at Newedge USA LLC in NewYork. "You have some decent earnings in the U.S. and Europe aswell."
Upbeat news from Finnish telecom giant Nokia (Stockholm: NOKI-SEK.ST - news) andGerman chipmaker Infineon (Xetra: 623100 - news) inspired European stockmarkets, while Wall Street benefited from encouraging resultsfrom U.S. drugmaker Merck (Other OTC: MKGAF - news) and mobile provider Sprint (Frankfurt: 2S7.F - news).
News that Britain's economy grew at a solid 0.8 percent pacein the first quarter, for an annual growth rate of 3.1 percent,the fastest since 2007, also boosted sentiment.
In the United States, private data showed that home pricesgrew at a solid clip in February, though Americans' confidencein the economy dipped in April from a more than six-month highset in March.
The Dow Jones industrial average closed up 85.67points, or 0.52 percent, to 16,534.41, the S&P 500 gained8.8 points, or 0.47 percent, to 1,878.23, and the NasdaqComposite ended up 29.142 points, or 0.72 percent, to4,103.543.
The FTSEurofirst 300 index of top European sharesclosed 1.2 percent higher at 1,352.42. The STOXX Europe 600 Techindex was up 1.4 percent, a top sectoral riser.
The MSCI world equity index, which tracksshares in 45 nations, rose 0.6 percent at 413.05 points.
Investors also looked for cues on whether Europeanpolicy-makers will embark on more stimulus to avert deflation.
The ECB president, Mario Draghi, told German lawmakers onMonday that bond purchases as a tool to stem falling prices -similar to the stimulus measures conducted by the U.S. FederalReserve -- remain some way off.
A report due on Wednesday is expected to show inflation inthe euro zone picking up to 0.8 percent in April, though thatwould still be well below the ECB's medium-term target of justbelow 2 percent. An omen of a below-target reading came onTuesday when Germany said its annual inflation rate was 1.1percent in April but less than the 1.3 percent rise expected.
"Germany is Europe's biggest economy, and we will bewatching what happens," said Eric Viloria, currency strategistat Wells Fargo Securities in New York. "If inflation comes intoo low, that raises expectations the ECB will lower rates ortake other steps that will hurt the currency."
Central bank purchases of bonds are designed to hold downlong-term interest rates and bolster economic activity. Theyalso erode a country's currency.
The euro was down 0.3 percent at $1.3811 and off 0.2percent against the yen, at 141.64 yen.
The dollar index, a measure of the greenback's value againstsix major currencies, rose 0.15 percent at 79.802.
As traders speculate on the ECB's next move, the Fed began atwo-day policy meeting on Tuesday. It is expected to trim itsmonthly bond-buying stimulus further.
In commodity markets, Brent crude ended up 86 cents,or 0.80 percent, at $108.98 a barrel, and U.S. crude settled up 44 cents, or 0.44 percent, at $101.28 per barrel.
Spot gold prices erased earlier gains, dipping 49cents, or 0.04 percent, to $1,295.11 an ounce. (Reporting by Richard Leong; Additional reporting by MichaelConnor in New York; Jamie McGeever, Marius Zaharia and TriciaWright in London; Editing by Dan Grebler, Meredith Mazzilli andLeslie Adler)
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