Yields on U.S. government debt rose, with the benchmark U.S. 10-year Treasury yield briefly climbing back above 1.4% after sliding last week to its lowest level since late September.

Gold prices eased on a firmer dollar and rising Treasury yields, but losses were limited by expectations that U.S. consumer price data due this week will show rising inflation.

Stocks on Wall Street were a sea of green as economically sensitive value stocks, led by banks and energy shares, rose 1.84%, outpacing a 0.25% gain in growth stocks. Oil stocks fueled a rebound in European equities.

The rebound after a recent sell-off shows investors are not giving up on the prospect of a Santa Claus rally, said Sam Stovall, chief investment strategist at CFRA Research.

"The market is saying that this Omicron variant, while still largely unknown, through anecdotal evidence points to something that will not be as ground-shaking as was originally thought. Investors sold first and asked questions later," Stovall said.

MSCI's all-country world index advanced 0.65%, while the broad STOXX Europe 600 index rose 1.38%.

On Wall Street, the Dow Jones Industrial Average rose 1.80%, the S&P 500 gained 0.96% and the Nasdaq Composite added 0.15%.

Omicron has spread to about one-third of U.S. states, but the Delta version remains the majority of COVID-19 infections in the United States, health officials said on Sunday.

"Thus far it does not look like there's a great degree of severity to it," Dr. Anthony Fauci, the top U.S. infectious disease official, told CNN.

Earlier in Asia, the MSCI index of Asia-Pacific shares outside Japan lost 1%.

China's central bank said it would cut the amount of cash banks must hold as reserves in an attempt to revive economic growth. The region has seen a series of corporate setbacks after ride-hailing giant Didi decided to withdraw from its New York listing last week.

Shares in China's Evergrande plunged about 20% after the developer said there was no guarantee it would have enough funds to meet debt repayments.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.146% to 96.343. The euro was down 0.33% at $1.1276, while the yen traded up 0.58% at $113.4500.

The yield on 10-year U.S. Treasury notes rose 5.8 basis points to 1.399%, after losing almost 13 basis points last week.

The market still expects aggressive tightening from the Federal Reserve to fight rising inflation.

"By severely limiting the FOMC's ability to respond to downside risks posed by Omicron, inflation has effectively destroyed the Fed put," Jefferies analysts said in note.

Inflation is "now the dominant driver of not only rates, but all risk assets", they added as traders wait for Friday's U.S. consumer price report.

Bitcoin slid 0.44% atop $49,208.37 after hitting a low of $41,967 over the weekend as profit-taking and macro-economic concerns prompted nearly $1 billion worth of selling across cryptocurrencies.

Oil climbed by $2 a barrel toward $72 on hopes the Omicron variant would have a less damaging economic impact and as the prospect of an imminent rise in Iranian oil exports receded.

Brent crude was up $1.90 at $71.78 a barrel. U.S. crude was up $1.91 at $68.17 a barrel. U.S. gold futures dropped 0.1% to $1,781.70 an ounce.