Will central banks act? Markets say yes.

Although the European Central Bank kept interest rates steady, stock and commodity markets were buoyed by optimism that central banks will provide stimulus to a weakening global economy.

World shares, commodities and the euro all gained on Wednesday as expectations grew that the financial crisis in Europe and a deteriorating economic outlook would prompt major central banks to embark on stimulus measures.

U.S. stock index futures also pointed to a stronger start on Wall Street.

The European Central Bank (ECB) resisted pressure to provide more support for the euro zone's ailing economy at its regular monthly policy meeting by holding its main interest rate steady at 1 percent.

But market participants said President Mario Draghi's comments at a news conference to explain the thinking behind the policy decision later will be key.

"The market will be looking for any guidance on rate cuts and on liquidity injections at the press conference," said John Hardy, FX strategist at Saxo Bank.

The euro was up 0.3 percent against the dollar at $1.2495, broadly steady from levels before the ECB rate decision and well above a near two-year low of $1.2288 hit last Friday.

Recent disappointing economic data from the United States and China, as well as signs the euro area slowdown is affecting core countries such as Germany, has been piling up pressure on the world's central banks to make some response.

"The market's expectation regarding further policy action globally is picking up," said Ian Stannard, an executive director at Morgan Stanley.

"We could well see easing taking place throughout many of the G10 countries," he said. "We believe that quantitative easing from the Fed is also very much back on the table."

Europe's share markets, back to full strength after two days of market holidays in Britain cut volumes, took their cue from a rally in Asia on the central bank stimulus hopes.

The pan-European FTSEurofirst 300 index rose 1.45 percent to 968.89 points, led by a gain of 2.6 percent in banking stocks, which stand to gain most from any fresh policy easing measures.

"If they (the ECB) give a hint of a rate cut possibly coming in July then I think we will see markets still move higher," said Neil Marsh, strategist at Newedge.

The MSCI World Equity Index extended the gains it has been making all week, rising 0.7 percent to 294.91 after strong gains across Asia and in other emerging markets.

The MSCI Emerging Equity Index was up for a second consecutive day, rising over 1 percent, as it recovered from six-month lows hit on Monday.

Despite the rally in riskier asset markets, Germany was able to sell 3.98 billion euros of five-year government bonds at a record low yield of 0.41 percent as investors remained nervous about Spain's banks and the possibility of Greece leaving the euro.

"(The auction) demonstrates that the demand for safety remains very strong despite increasing risk of a policy intervention by the ECB or EU politicians," said Michael Leister, rate strategist at DZ Bank.

German 10-year bond yields, which hit record lows last week as the nervousness over Spain's finances prompted a surge in demand for less risky assets, were mostly steady at 1.25 percent .

Signs that Germany and European Union officials are urgently exploring ways to rescue Spain's debt-stricken banks eased some of the pressure on Spanish government debt ahead of a planned auction of up to 2 billion euros ($2.5 billion) in new bonds on Thursday.

Spain, the euro zone's fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.

Spanish 10-year bond yields were 3.5 basis points lower at 6.28 percent, extending this week's fall to around 25 basis points.

Gold rose more than 1 percent to $1,633.18 an ounce, its highest level in a month, on the central bank stimulus hopes.

Other precious metals rose in gold's wake, with both silver and palladium climbing nearly 3 percent to their day's highs.

In the oil markets prices also found support from the larger-than-expected drop in U.S. crude stocks reported by the American Petroleum Institute industry group.

Brent crude, which had seen a near 25 percent drop in the past three months, rose by $1.47 to $100.31 a barrel, while U.S. crude climbed $1.16 cents to $85.45.

Weekly inventory data from the U.S. Energy Information Administration, which typically carries more weight in the market than API estimates, will be released later on Wednesday.