By Scott Murdoch and Amanda Cooper

Signage is seen outside the LSEG (London Stock Exchange Group) headquarters in Paternoster Square, London. REUTERS

(Reuters) - Global stocks rose on Tuesday after Federal Reserve officials breathed more life into expectations for a December interest rate cut, prompting investors to pile into technology stocks, shrugging off concerns about the sector becoming overheated.

Google parent Alphabet (GOOGL.O)  could hit $4 trillion in market capitalisation later on, which would make it only the fourth company to reach that mark, showing investors believe the AI-fuelled tech boom is set to continue.

MSCI's All-World index (.MIWD00000PUS)  rose for a third day, lifting off last week's two-month lows, as shares in Europe edged up (.STOXX) 0.2% and U.S. stock index futures , hovered either side of unchanged, following Monday's rally in the benchmark indices.

RISING RATE CUT BETS

The yield on benchmark 10-year Treasury notes dipped nearly 1 basis point to 4.03%, while two-year yields , which tend to fall in line with traders' expectations of lower Fed fund rates, were steady at 3.49% in Europe, after dropping 2.5 basis points in the previous session.

The prospect of a U.S. interest rate cut is rising after Fed Governor Christopher Waller said on Monday that available data indicated that the U.S. job market remained weak enough to warrant another quarter-point cut. His remarks followed those of New York Fed President John Williams, who suggested late on Friday that a cut in December was a possibility.

Markets are pricing in a roughly 81% chance of a quarter-point cut next month, according to CME's FedWatch Tool, up from 42.4% a week ago. The U.S. central bank meets on December 9 and 10.

Later on Tuesday, investors will be able to sift through delayed data on retail sales, wholesale inflation, home prices and consumer confidence, although these may not have much impact on their thinking about what the Fed might do next month.

The shift in rate expectations over the last week has boosted stocks, but has had limited impact on the dollar. So far this month, it has gained against every major currency except the offshore Chinese yuan , which has strengthened around 0.5%.

"This suggests, to me, that the FX market remains in a mindset of trading on growth differentials over anything else and, with the U.S. economy outperforming peers now, as well as likely continuing to do so into 2026, bodes well for the buck moving forwards," Pepperstone senior research strategist Michael Brown said.

TENSION OVER JAPAN

Most notably, the dollar has forged higher against the Japanese yen , which is hovering around its weakest in 10 months and causing unease among Tokyo officials about the need for intervention to support it.

The dollar was last down 0.3% on the day at 156.43, having gained 1.6% in November. The euro was up 0.1% at $1.1528.

Adding to tension around Japanese markets is the ongoing row between Tokyo and Beijing over a comment by Japan's Prime Minister Sanae Takaichi earlier in November that a Chinese attack on Taiwan could trigger a Japanese military response.

Takaichi and U.S. President Donald Trump spoke on Tuesday, following his call on Monday with Chinese President Xi Jinping. She said Trump explained U.S.-China relations to her.

Trump said on Monday he would travel to Beijing in April, which was interpreted as a further sign that diplomatic and political relations between the two countries were improving following their trade war truce.

U.S. stock and bond markets will be closed on Thursday for the Thanksgiving holiday and will trade for half a day on Friday.

ALPHABET HEADS FOR $4 TRILLION