* European shares follow Asia higher
* Focus turns to Fed meeting, U.S. GDP numbers
* Dollar drops to weakest since March 3
* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, April 26 (Reuters) - European stocks clawed their
way higher on Monday as world markets began the week in a
relatively upbeat mood following further signs last week that
economies are recovering rapidly.
The start to the week was relatively quiet, however, as
investors refrain from taking on large positions ahead of a
two-day Federal Reserve meeting beginning on Tuesday and
quarterly gross domestic product numbers for the United States.
But the general sentiment remained bullish with Wall Street
hitting another intraday record-high on Friday and European
shares not far off record highs in early Monday trading.
The broader Euro STOXX 600 gained 0.23% while
Germany's DAX rose 0.22%. Britain's FTSE 100
climbed 0.21%.
Asian shares also rallied where MSCI's broadest index of
Asia-Pacific shares outside Japan reached its
highest since March 18, despite a late sell-off in Chinese
shares.
Wall Street futures pointed to a slightly weaker open
.
The MSCI world equity index, which tracks
shares in 49 countries, rose 0.2%.
Stocks are basking in a massive rally - the MSCI world index
has suffered only three down months in the past 12 and is up
nearly 5% this month and 9% for the year as investors bet on a
rapid post-pandemic economic rebound turbocharged by vast
government and central bank stimulus.
Analysts, however, say stocks look a little too confident
and that the rally will run into hurdles after setting such a
lightning pace and with so much of the recovery and fiscal
stimulus splurge already priced in.
"The real crux of the issue, however, is what's in the
price. The year-to-date rally has increasingly eliminated upside
to our targets," noted Andrew Sheets, a strategist at Morgan
Stanley.
"Across four major global equity markets (the U.S., Europe,
Japan and emerging markets), only Japan is currently below our
end-2021 strategy forecast."
BOLSTER CONFIDENCE
Still, recent data pointing to a solid global economic
recovery has only served to bolster confidence. Strong corporate
earnings and the continued rollout of COVID-19 vaccinations in
developed economies have also supported sentiment.
Early April manufacturing activity indicators out last week
pointed to a robust start to the second quarter with data
hitting record highs in the United States and signalling an end
to Europe's double-dip recession.
First-quarter U.S. gross domestic product data due later in
the week is likely to show activity probably returned to
pre-pandemic levels, analysts said.
"We estimate that the economy will close the output gap and
rise above potential in the second half of this year," ANZ
economists wrote in a morning note, suggesting more upside for
shares.
"(Europe) cannot match this, but as 2021 progresses into
2022, the growth differential to the U.S. will narrow," they
added.
In bond markets, government debt yields rose as investors
dumped safer assets.
The U.S. 10-year Treasury yield rose 1 basis point to
1.5773% but that is some way off the plus 1.7%
levels hit earlier this month when fears about a spike in
inflation rattled markets.
In currencies, the dollar -- which had benefited from rising
Treasury yields - fell against a basket of currencies to
its weakest since early March -- another sign of the bullish
mood of global investors this month.
Turkey's lira edged lower, adding to a recent
slide and nearing an all-time low as a chill settled on
relations with the United States and after the new central bank
chief signalled that rate hikes would harm the economy.
In commodities, U.S. crude fell 57 cents to $61.57
per barrel and Brent eased 57 cents to $65.64.
Gold climbed 0.1% to $1,779 an ounce.
(Additional reporting by Swati Pandey in Sydney, editing by Ed
Osmond)