* Upbeat earnings activity boosts U.S. and European shares
Euro falls on below-forecast German inflation data
* Draghi cools ECB QE talk; Fed begins policy meeting
* U.S. bond yields rise as investors grab Apple debt deal
(Updates market action, adds quote)
By Richard Leong
NEW YORK, April 29 (Reuters) - World stock indexes rose on solid company earnings on Tuesday, 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 after the United States and the European Union imposed more sanctions on Russia for its role in backing the separatist movement in eastern Ukraine.
Relief that the West's broadened sanctions on Moscow were limited encouraged some investors to step back into stocks and other risky assets while paring holdings in the traditional safe havens of gold and U.S. and German government debt.
Yields on U.S. and German benchmarks edged up to 2.69 percent and 1.50 percent, respectively. U.S. bond yields also were affected by the $12 billion in bond supply from iPhone maker Apple, which enticed huge orders, according to Thomson Reuters unit IFR.
Oil prices rebounded a day after posting their biggest fall in a month as traders focused on the violence in eastern Ukraine and a possible delay in U.S. relaxation of sanctions on Iran later this year.
Equities drew the most investor attention on Tuesday, with shares in Europe rising more than 1 percent and Wall Street indexes also rising, though less dramatically.
"The Ukraine situation played an important role here. The tension there has been diffused for now," said Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York. "You have some decent earnings in the U.S. and Europe as well."
Upbeat news from Finnish telecom giant Nokia and German chipmaker Infineon inspired European stock markets, while Wall Street benefited from encouraging results from U.S. drugmaker Merck and mobile provider Sprint .
News that Britain's economy grew at a solid 0.8 percent pace in the first quarter, for an annual growth rate of 3.1 percent, the fastest since 2007, also boosted sentiment.
In the United States, private data showed that home prices grew at a solid clip in February, though Americans' confidence in the economy dipped in April from a more than six-month high set in March.
The Dow Jones industrial average closed up 85.67 points, or 0.52 percent, to 16,534.41, the S&P 500 gained 8.8 points, or 0.47 percent, to 1,878.23, and the Nasdaq Composite ended up 29.142 points, or 0.72 percent, to 4,103.543.
The FTSEurofirst 300 index of top European shares closed 1.2 percent higher at 1,352.42. The STOXX Europe 600 Tech index was up 1.4 percent, a top sectoral riser.
The MSCI world equity index, which tracks shares in 45 nations, rose 0.6 percent at 413.05 points.
Tokyo's Nikkei earlier closed down 1 percent.
Investors also looked for cues on whether European policy-makers will embark on more stimulus to avert deflation.
The ECB president, Mario Draghi, told German lawmakers on Monday that bond purchases as a tool to stem falling prices - similar to the stimulus measures conducted by the U.S. Federal Reserve -- remain some way off.
A report due on Wednesday is expected to show inflation in the euro zone picking up to 0.8 percent in April, though that would still be well below the ECB's medium-term target of just below 2 percent. An omen of a below-target reading came on Tuesday when Germany said its annual inflation rate was 1.1 percent in April but less than the 1.3 percent rise expected.
"Germany is Europe's biggest economy, and we will be watching what happens," said Eric Viloria, currency strategist at Wells Fargo Securities in New York. "If inflation comes in too low, that raises expectations the ECB will lower rates or take other steps that will hurt the currency."
Central bank purchases of bonds are designed to hold down long-term interest rates and bolster economic activity. They also erode a country's currency.
The euro was down 0.3 percent at $1.3811 and off 0.2 percent against the yen, at 141.64 yen.
The dollar index, a measure of the greenback's value against six major currencies, rose 0.15 percent at 79.802.
As traders speculate on the ECB's next move, the Fed began a two-day policy meeting on Tuesday. It is expected to trim its monthly bond-buying stimulus further.
In commodity markets, Brent crude ended up 86 cents, or 0.80 percent, at $108.98 a barrel, and U.S. crude settled up 44 cents, or 0.44 percent, at $101.28 per barrel.
Spot gold prices erased earlier gains, dipping 49 cents, or 0.04 percent, to $1,295.11 an ounce.
(Reporting by Richard Leong; Additional reporting by Michael Connor in New York; Jamie McGeever, Marius Zaharia and Tricia Wright in London; Editing by Dan Grebler, Meredith Mazzilli and Leslie Adler)