* Upbeat earnings activity boosts U.S., European shares Euro falls on below-forecast German inflation data
* Draghi cools ECB QE talk; Fed to begin policy meeting
* U.S. bond yields rise as Apple prepares huge bond deal
(Updates with U.S. markets, adds quote, changes dateline; previous LONDON) NEW YORK, April 29 (Reuters) - World stock indexes rose on Tuesday on well-received corporate earnings, while the euro slipped as weaker-than-expected German inflation data kept alive chances of more stimulus from the European Central Bank. Worries about Ukraine moved to the back burner, for now, after the United States and European Union imposed more sanctions on Russia for its role in backing the separatist movement in eastern Ukraine. Some relief that the West's broadened sanctions on Moscow were limited led some investors to step back into stocks and other risky assets and to pare their safe-haven holdings in gold and U.S. and German government debt. U.S. and German benchmark yields rose to 2.71 percent and 1.51 percent, respectively. U.S. bond yields were also under pressure on a huge bond offering from iPhone maker Apple. "The Ukraine situation played an important role here. The tension there has been diffused for now. You have some decent earnings in the U.S. and Europe as well," Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York, said of the gains in equities. Upbeat news from Finnish telecom giant Nokia and German chipmaker Infineon inspired European stock markets, while encouraging results from U.S. drugmaker Merck and mobile provider Sprint helped Wall Street open higher. The equity-friendly tone to markets on Tuesday was helped by news Britain's that economy grew at a solid 0.8 percent pace in the first quarter, giving an annual growth rate of 3.1 percent, the fastest since 2007. Private data showed U.S. home prices grew at a solid clip in February, while Americans' confidence in the economy dipped in April from the highest in more than six years set in March.
In early trading, the Dow Jones industrial average rose 68.10 points, or 0.41 percent, at 16,516.84. The Standard & Poor's 500 Index was up 4.85 points, or 0.26 percent, at 1,874.28. The Nasdaq Composite Index was up 4.54 points, or 0.11 percent, at 4,078.94. The FTSEurofirst 300 index of top European shares gained 1 percent, while Tokyo's Nikkei earlier closed down 1 percent. With the gains in the U.S. and Europe, the MSCI world equity index, which tracks shares in 45 nations, rose 0.4 percent. Investors also took cues from the mixed signals on whether European central bankers will ease policy in the coming weeks and months to fight off the threat of deflation. ECB President Mario Draghi told German lawmakers on Monday that further monetary easing in the form of bond-buying remains some way off, and the ECB pumped more liquidity into the market on Tuesday through its weekly money market operations. German annual inflation accelerated 1.1 percent in April but less than the 1.3 percent rise expected. A report due on Wednesday is expected to show inflation in the euro bloc picking up to 0.8 percent in April, but that would still be well below the ECB's medium-term target of just below 2 percent.
"This will spark hopes the ECB will conduct another round of unconventional policy. The ECB may not have a choice," Newedge's Batenburg said. Central bank purchases of bonds, such as those the Federal Reserve has conducted and has begun to dial back, are aimed to hold down long-term interest rates and bolster economic activity. But they also erode the country's currency. The euro was down 0.2 percent at $1.3821 and off about 0.1 percent at 141.89 yen. The dollar index, a measure of the greenback's value against a basket of currencies, was little changed at 79.763.
As traders speculate on the ECB's next move, the Fed will begin a two-day policy meeting on Tuesday, and is expected to trim its bond-buying stimulus further. In commodity markets, Brent crude was last up $1.09, or up 1.01 percent, at $109.21 a barrel, and U.S. crude was up $1.17, or up 1.16 percent, at $102.01 a barrel. Spot gold prices rose $1.9 or 0.15 percent, to $1,297.50 an ounce.
(Reporting by Richard Leong; additional reporting by Jamie McGeever, Marius Zaharia and Tricia Wright; Editing by Alison Williams and Dan Grebler)