Gold hit another record high above $1,340 an ounce, copper rose to its highest since July 2008 and oil rose to a two-month high as the dollar, driven by investor concern over the outlook for global growth, continued to weaken.

Risk assets soared on encouraging US services sector data, the BoJ's rate cut and the Reserve Bank of Australia's decision not to raise rates, raising investor hopes that cheap money will flood global economies. The Federal Reserve has suggested it may engage in further quantitative easing unless the US economic outlook improves.

"Additional quantitative easing from the (Fed) remains the market's preoccupation, and one that was given further fuel with the overnight decision of the Bank of Japan to cut its overnight rate," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.

The BOJ's measures - cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets - pushed the Nikkei average to close 1.5 percent higher.

Tokyo's action came after Fed Chairman Ben Bernanke said on Monday that more asset purchases could further ease financial conditions and help the economy.

The euro jumped to its highest since February against the dollar on concerns that further US quantitative easing could undermine dollar strength.

US stocks rose after data showed the pace of growth in the US services sector, which accounts for 80 percent of US jobs, accelerated last month more quickly than economists had expected and hiring also picked up.

The Dow Jones Industrial Average was up 163.89 points, or 1.52 percent, at 10,915.16. The Standard & Poor's 500 Index was up 20.22 points, or 1.78 percent, at 1,157.25. The Nasdaq Composite Index was up 47.09 points, or 2.01 percent, at 2,391.61.

"Given unemployment and the state of the housing market, central banks didn't have a choice but to take steps like this, and it's what the market wanted to see," said Uri Landesman, president at the New York-based Platinum Partners. "This could be a sign of things to come."

The pan-European FTSEurofirst 300 index of top European shares closed up 1.4 percent at 1,066.12 points.

World stocks measured by the MSCI All-Country World Index rose 1.61 percent, while the Thomson Reuters global equity index rose 0.16 percent.

In currencies, a dollar index was down against major currencies, falling 0.74 percent to 77.865 after hitting an 8-1/2 month low. The euro was up 1.05 percent at $1.3823 after climbing as high as 1.3830. Against the Japanese yen, the dollar was down 0.04 percent at 83.31 after going as low as 82.96 yen on electronic trading platform EBS.

The prospect of further quantitative easing from the Fed modestly supported US Treasury prices somewhat.

The benchmark 10-year US Treasury note was up 3/32, with the yield at 2.467 percent. The 2-year US Treasury note was unchanged with the yield at 0.411 percent. The 30-year US Treasury bond was down 4/32, with the yield at 3.716 percent.

The Australian dollar fell 0.9 percent to $0.9594 after its central bank left interest rates steady for a fifth month, confounding expectations of a rise.

Gold was pushed higher by concern about more monetary easing and possibly higher long-term inflation. The precious metal hit another record high bid at $1,341.20 an ounce.

Oil prices rose more than 1 percent to $82.58 a barrel, and copper prices rose to $8,197 per ton. Tin rose to a new all-time high at $26,000 a ton, platinum, aluminum, zinc, lead and nickel touched multi-month highs.