Global stocks surged ahead on Thursday led by overnight Wall Street gains as bond markets settled down after more than a week of losses.

European and Asian shares both rose -- with South Korea's benchmark index hitting an all-time high and high-flying Germany rising more than 1.5 percent. Wall Street looked set for a positive, if less robust, start.

The dollar rose to 4-1/2 year highs against the Japanese yen but was flat versus the euro.

Central banks' tendency towards tightening was underlined by the Swiss National Bank, which raised interest rates by 25 basis points to a target of around 2.5 percent and said more hikes were likely.

Concern about higher global interest rates has driven government bond yields sharply higher over the past few weeks, lifting U.S. Treasury yields to five-year peaks before a slight retreat. The 10-year benchmark was still yielding 5.217 percent.

The yield on Citi's world bonds index, meanwhile, is at levels not seen since January 2001.

Bond markets, however, have shown some signs of stabilizing. Some consolidation is in order, said Bank of America trading strategist Ricardo Barbieri-Hermitte.

One result was to boost sentiment towards equities, starting with Wall Street on Wednesday where the S&P 500 gained 1.52 percent on Wednesday.

European shares climbed, with leading indexes adding around 1 percent. The pan-European FTSEurofirst 300 index was up 0.94 percent.

Earlier, Japan's Nikkei average closed up 0.62 percent or 109.52 points at 17,842.29 and the broader TOPIX index gained 0.61 percent to 1,756.64.

Investors were on watch for a rate decision by the Bank of Japan on Friday. It was expected to leave rates unchanged.

DOLLAR, BONDS

The dollar hit a 4-1/2-year peak against the yen, supported by expectations that the Federal Reserve will not cut interest rates this year.

The dollar will remain supported as long as yields remain firm, said Antje Praefcke, currency strategist at Commerzbank Corporates & Markets.

The U.S. currency was up nearly a third of a percent at 122.98 yen, having earlier hit 123.03, according to Reuters data. Such levels have not been seen since December 2002, when it rose as high as 125.70 yen.

Against the euro, the dollar held steady at $1.3307, having hit an 11-week high on Wednesday.

Benchmark 10-year euro zone government bond yields were flat with the market edgy about prospects for global rates. The bond was yielding 4.631 percent.

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