Global stock markets surged Tuesday after a better than expected U.S. economic survey gave a big boost to investor sentiment, which had earlier been buoyed by the Bank of Japan's surprise decision to ease monetary policy further.

Rising expectations that the U.S. Federal Reserve will soon join the Bank of Japan in enacting fresh stimulus measures, despite the better than expected survey from the Institute for Supply Management, hit the dollar, which slid to an eight-month low against the euro.

In Europe, the FTSE 100 index of leading British shares closed up 79.79 points, or 1.4 percent, at 5,635.76 while Germany's DAX rose 81.62 points, or 1.3 percent, to 6,215.83. The CAC-40 in France ended 82.12 points, or 2.3 percent, higher at 3,731.93.

In the U.S., the Dow Jones industrial average was up 163.67 points, or 1.5 percent, at 10,914.94 around midday New York time, while the broader Standard & Poor's 500 index rose 20.25 points, or 1.8 percent, to 1,157.28.

Stocks in Europe and the U.S. had been up all day after Japan's benchmark Nikkei 225 stock average reversed early losses to close 1.5 percent higher at 9,518.76. The rally came after the country's central bank cut its key interest rate to a range of zero to 0.1 percent and said it may set up a 5 trillion yen ($60 billion) fund to buy government bonds and other assets in its latest attempt to prop up the faltering Japanese economy.