LONDON - Futures for the US S&P Global index hit a record high on Tuesday and world stocks rose to new 5-1/2 month peaks, lifted by bets on a US fiscal stimulus package and calm on the Sino-US diplomatic front before a crucial round of trade talks.

Investors are taking cheer from an order from President Donald Trump restoring some enhanced unemployment payments and suspending payroll taxes, setting the stage for the S&P500 index to regain its February record highs. It closed around 1 percent off those levels on Monday.

S&P500 futures jumped 0.7 percent while a pan-European equity index rose more than 2 percent , with auto shares leading the way after a surge in Chinese car sales.

The mood is watchful as sparring continues in the US Congress over extending fiscal stimulus while economic data such as a steep drop in South Korean exports and a rise in UK jobless rates remain a cause for concern.

But upbeat comments by US Treasury Secretary Steven Mnuchin on the prospects for a bipartisan stimulus deal supported Brent crude futures at near five-month highs and kept the dollar index near a one-week peak.

Commerzbank analysts said markets were shrugging off doubts over the legality of Trump’s order and appeared convinced Congress would agree a deal

“Not without good reason, because in the election campaign both parties have an interest in presenting themselves well,” they said.

“Who wants to be seen as the stingy bad guy even in times of great need?”

MSCI's global equity index rose 0.6 percent while an Asian share benchmark ex-Japan gained nearly 1 percent. Japan's Nikkei climbed 1.9 percent.

US and Chinese officials hold talks on Saturday to review the first six months of the Phase 1 trade deal. While China is lagging targets on energy and farm goods purchases from the United States, markets seem confident trade ties will be insulated from the diplomatic noise.

Such optimism kept safe haven assets under gentle pressure, with gold falling under US$2000 an ounce, down more than 2 percent. Ten-year US Treasury yields were near a two-week high of 0.5870 percent while German yields likewise rose to two-week highs.

Onwards and upwards

Tuesday's gains follow a robust Wall Street session when the Dow and S&P500 rose and investors rotated towards value stocks and out of tech, reflecting optimism over the growth outlook.

Nasdaq futures were up 0.5 percent.

On currencies, the euro firmed 0.5 percent against the dollar after a German investor sentiment survey showed more improvement than expected. However there have been some signs of late the euro's 10 percent rally since March may lose steam.

One factor underpinning the dollar’s decline - and equity strength - is the sharp fall in real, or inflation-adjusted, Treasury yields.

But in a danger signal for the euro-dollar rally, German real yields seem to have caught up with US peers as euro zone inflation expectations have risen.

Risk-sensitive currencies, such as the Australian and New Zealand dollars, firmed while an emerging currency index firmed 2.6 percent.

Even the battered Turkish lira bounced 1.3 percent after four lossmaking sessions.