World stocks gain on Fed easing hopes

Federal Reserve to consider more monetary easing

A softer dollar kept the euro near three-week highs on Monday and European shares followed Asian markets higher as disappointing US growth raised expectations that the Federal Reserve would consider more monetary easing.

But trading was expected to be light ahead of May Day holidays throughout Europe on Tuesday and before the European Central Bank's meeting later in the week where policymakers will consider the declining health of the region's economy.

"The weaker-than-expected US GDP report has re-heightened speculation over the prospect of further monetary stimulus from the Fed, weighing upon the dollar," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ, Ltd.

The speculation sent the dollar to a two-month low against a basket of currencies of 78.64, leaving the euro mostly steady around the $1.3245 mark.

Spanish 10-year bond yields were trading just below the 6% level after the government reported the economy had contracted by 0.3% in the first quarter, which was better than forecast.

European shares climbed for a fifth straight session, tracking the firmer markets globally with the FTSE Eurofirst index of top European shares up 0.2 points. The MSCI world equity index, was up 0.15% at 329.93 for a gain of just over 10% in the year to date.