Investors expected the U.S. Federal Reserve to announce one more interest rate hike at a policy meeting later in the day, but they speculated that the U.S. central bank might signal that it plans to stop tightening monetary policy.
MSCI's index of stocks around the globe rose 0.7 per cent, boosted by broad gains in Europe and the U.S., though it remains down nearly 12 per cent since the start of December.
On Wall Street, the Dow Jones Industrial Average rose 169.77 points, or 0.72 per cent, to 23,845.41, the S&P 500 gained 19.45 points, or 0.76 per cent, to 2,565.61 and the Nasdaq Composite added 61.22 points, or 0.9 per cent, to 6,845.13.
U.S. stocks are on pace for their biggest December decline since 1931, the depths of the Great Depression. https://tmsnrt.rs/2A3z5ML
Logistics and delivery firm FedEx considered a bellwether for the world economy, slashed 2019 forecasts, noting "ongoing deceleration" in global growth.
"It's a confluence of several important factors: the market is adjusting its outlook on growth and there is a consensus we will see a slowdown. More importantly, the market is adjusting to the idea this will translate into lower earnings growth," said Norman Villamin, chief investment officer for private banking at Union Bancaire Privee in Zurich.
Expectations of a Fed pause and the equity sell-off have sent 10-year Treasury yields to their lowest since August. Benchmark 10-year notes last rose 2/32 in price to yield 2.8156 per cent, from 2.823 per cent late on Tuesday.
Yields in Japan and Australia also reached multi-month lows.
The dollar index fell 0.49 per cent, with the euro up 0.57 per cent to $1.1426.
(With inputs from agencies.)