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 / Updated  / Source: Reuters
By Reuters

World stocks hit their highest in five weeks on Tuesday as a dovish tone from Janet Yellen cooled near-term U.S. rate hike bets and a seven-month peak in crude prices cheered oil firms.

European stocks were up 1 percent in early trading after Wall Street's S&P 500 had hit a seven-month high on Monday and Asia gained 1.5 percent overnight.

Workers speak above an electronic information board at the London Stock Exchange in the City of London January 2, 2013. REUTERS/Paul Hackett

It came after the Fed chief Yellen had called last week's U.S. jobs numbers disappointing and opted not to repeat her recent message that U.S. interest rates could rise again in the coming months.

That was balanced however, by her cautioning against attaching too much significance to the payrolls data in isolation and as she pointed to other more upbeat signals for the world's largest economy.

"Yellen has certainly put pay to a rate rise in June but there's more going on here than that," said Aberdeen Asset Management's Luke Bartholomew.

"Her message really is that the U.S. is making consistent progress towards full-employment, that inflation should pick up and there's more positives than negatives. This should give those hoping for a July rate rise some modicum of solace."

With the Fed suggesting it was in no rush to increase interest rates, bond yields slipped with 10-year U.S. Treasury yields retreating to 1.74 percent from 1.84 percent last week. Benchmark yields are down 63 basis points so far this year.

European bonds barely moved in early trading with German Bunds already near all-time lows thanks to the European Central Bank's unprecedented stimulus efforts.

In the FX markets, Yellen's comments also kept the dollar pinned near a one-month low against other top currencies.

The Australian dollar meanwhile jumped 1 percent after the Reserve Bank of Australia appeared to raise the bar for further rate cuts. Sterling also climbed 0.7 percent to $1.4524 as jostling continued over the UK's June 23 vote on its European Union membership.

Earlier on Tuesday, Japanese Finance Minister Taro Aso told reporters that he would refrain from commenting on Japan's possible response in the currency market if the yen were to rise further.

Aso declined to comment on U.S. Treasury Secretary Jack Lew's remark over the weekend that described recent currency market moves as "orderly" in a sign of caution towards currency intervention.