Last checked at 
Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
*
Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Chris Prentice and Elizabeth Howcroft
WASHINGTON/LONDON, Oct 25 (Reuters) - Wall Street continued its advance on Tuesday as weak data stoked hopes the Federal Reserve will slow its aggressive pace of rate hikes and European shares touched their highest level in a month as better-than-expected earnings offset economic worries.
The U.S. dollar index gave up the session's slight gains to ease against a basket of major currencies, giving a boost to commodities. It was last down 0.8%.
The Dow Jones Industrial Average rose 0.66%, the S&P 500 gained 1.04% and the Nasdaq Composite added 1.57% by 10:57 a.m. EDT (1457 GMT).
Europe's STOXX 600 index extended earlier gains, up 1.18%. MSCI's main European Index rose 1.57% and touched its highest level since mid-September.
The MSCI world equity index, which tracks shares in nearly 50 countries, was up on the day.
Swiss bank UBS was among those beating market expectations. However, Europe's largest bank, HSBC, dropped after reporting a 42% slump in third-quarter profit.
Tech giants Alphabet Inc and Microsoft Corp report earnings later in the day.
U.S. consumer confidence ebbed in October after two straight monthly increases amid rising concerns about inflation and a possible recession next year, a survey showed on Tuesday.
U.S. August Case-Shiller housing data came in weaker than expected.
"A lot of (the rally over the last week) is predicated on the Fed potentially slowing down. The housing data this morning is another example that bad news for the economy is good news for the stock market," said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance in Charlotte, North Carolina.
Asian equities struggled to make gains due to uncertainty over whether President Xi Jinping's new leadership team would prioritise economic growth in China, where the onshore yuan finished the domestic session with its weakest close since late 2007.
The European Central Bank meets on Thursday and is expected to raise rates by 75 basis points.
The British pound was up 1.55% at $1.1458. On Monday the British currency recovered from session lows and gilt yields fell sharply in a sign of investor relief when former finance minister Rishi Sunak was named the next prime minister. But analysts said investors' confidence in the ruling Conservative Party's ability to manage the economy was still shaken.
Euro zone government bond yields fell, with the benchmark German 10-year yield traded at 2.308%.
German business morale fell slightly in October but the data still beat analyst estimates.
The data "suggests that at least business sentiment is forming a trough," said ING global head of macro Carsten Brzeski in a client note. "This, however, does not mean that any improvement in the economy is near."
U.S. business activity contracted for a fourth straight month, data on Monday showed, suggesting that the Fed's rate increases have softened the economy, which in turn raised hopes that the central bank could begin slowing the pace of the hikes.
Hani Redha, a portfolio manager at Pinebridge Investments, said some investors were relieved by "some hope that the pace of central bank tightening may start to slow later this year."
Economists polled by Reuters said the central bank should not pause until inflation falls to around half its current level.
Pinebridge's Redha said earnings estimates have been edging lower in recent months but that the pace of this has been "fairly modest."
"The potential relief that investors feel in terms of coming towards the end of the hiking cycle, that seems to dominate over the grinding lower of earnings estimates."
The weaker greenback boosted commodities, making them less expensive to holders of other currencies. Spot gold prices traded higher, with investors' eyes on the Fed. Spot gold was last up 0.4%.
Oil prices also reversed losses to rise $1 a barrel on a weaker dollar and supply concerns.
