* European shares follow Asia higher
* Focus turns to Fed meeting, U.S. GDP numbers
* Dollar drops to weakest since March 3
* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, April 26 (Reuters) - European stocks clawed their way higher on Monday as world markets began the week in a relatively upbeat mood following further signs last week that economies are recovering rapidly.
The start to the week was relatively quiet, however, as investors refrain from taking on large positions ahead of a two-day Federal Reserve meeting beginning on Tuesday and quarterly gross domestic product numbers for the United States.
But the general sentiment remained bullish with Wall Street hitting another intraday record-high on Friday and European shares not far off record highs in early Monday trading.
The broader Euro STOXX 600 .STOXX gained 0.23% while Germany's DAX .GDAXI rose 0.22%. Britain's FTSE 100 .FTSE climbed 0.21%.
Asian shares also rallied where MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS reached its highest since March 18, despite a late sell-off in Chinese shares.
Wall Street futures pointed to a slightly weaker open ESc1 .
The MSCI world equity index .MIWD00000PUS , which tracks shares in 49 countries, rose 0.2%.
Stocks are basking in a massive rally - the MSCI world index has suffered only three down months in the past 12 and is up nearly 5% this month and 9% for the year as investors bet on a rapid post-pandemic economic rebound turbocharged by vast government and central bank stimulus.
Analysts, however, say stocks look a little too confident and that the rally will run into hurdles after setting such a lightning pace and with so much of the recovery and fiscal stimulus splurge already priced in. real crux of the issue, however, is what's in the price. The year-to-date rally has increasingly eliminated upside to our targets," noted Andrew Sheets, a strategist at Morgan Stanley (NYSE:MS).
"Across four major global equity markets (the U.S., Europe, Japan and emerging markets), only Japan is currently below our end-2021 strategy forecast."
BOLSTER CONFIDENCE
Still, recent data pointing to a solid global economic recovery has only served to bolster confidence. Strong corporate earnings and the continued rollout of COVID-19 vaccinations in developed economies have also supported sentiment.
Early April manufacturing activity indicators out last week pointed to a robust start to the second quarter with data hitting record highs in the United States and signalling an end to Europe's double-dip recession.
First-quarter U.S. gross domestic product data due later in the week is likely to show activity probably returned to pre-pandemic levels, analysts said.
"We estimate that the economy will close the output gap and rise above potential in the second half of this year," ANZ economists wrote in a morning note, suggesting more upside for shares.
"(Europe) cannot match this, but as 2021 progresses into 2022, the growth differential to the U.S. will narrow," they added.
In bond markets, government debt yields rose as investors dumped safer assets.
The U.S. 10-year Treasury yield rose 1 basis point to 1.5773% US10YT=RR but that is some way off the plus 1.7% levels hit earlier this month when fears about a spike in inflation rattled markets.
In currencies, the dollar -- which had benefited from rising Treasury yields - fell against a basket of currencies =USD to its weakest since early March -- another sign of the bullish mood of global investors this month.
Turkey's lira edged lower TRYTOM=D3 , adding to a recent slide and nearing an all-time low as a chill settled on relations with the United States and after the new central bank chief signalled that rate hikes would harm the economy. commodities, U.S. crude CLc1 fell 57 cents to $61.57 per barrel and Brent LCOc1 eased 57 cents to $65.64.
Gold climbed 0.1% to $1,779 an ounce. XAU=
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