LONDON (BLOOMBERG) - Global stocks rallied for a second day and the dollar weakened amid speculation that policy makers will mitigate the damage of the United Kingdom's vote to leave the European Union, including a pause in the Federal Reserve's tightening cycle. Crude oil rallied and the pound rose.

The MSCI All-Country World Index headed for its highest level since before the Brexit result and US equity-index futures advanced as odds indicated the Fed is more likely to cut rates than raise them over the rest of the year. Sterling erased earlier losses, having rebounded in the last session from near a 31-year low.

Oil climbed above US$48 (S$65) a barrel and gold gained, while the dollar retreated against most of its major peers. Emerging-market stocks and currencies climbed for a second day. Bond yields in Spain, Portugal and Italy slipped, while those on Japanese debt fell to a record low.

Investors are looking to policy makers for support as they await Britain's plan for its extrication from the EU, something that's being held back by political upheaval in the country following the vote and Prime Minister David Cameron's consequent resignation.

Fed Governor Jerome Powell warned that global risks have shifted further to the downside after the UK vote, introducing new uncertainties that may require a reassessment of monetary policy. South Korea announced a fiscal stimulus package on Tuesday and Bank of Japan chief Haruhiko Kuroda said Wednesday that more funds can be injected into the market should they be needed.

"We had a bumpy week and we're bouncing back," said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London. His firm manages US$151 billion. "Not raising rates any time soon should take some of the pressure off the dollar and the domestic economy remains reasonable which should support earnings improvement and market fears."

The MSCI All-Country World Index rose 0.9 percent at 1:34 p.m. in London. The Stoxx Europe 600 Index climbed 2.1 per cent, with energy producers and miners among the best performers. The equity gauge has recovered 4.7 per cent after tumbling 11 percent over two days following the shock result of the U.K. referendum. It is still heading for a second consecutive quarterly decline.

The FTSE 100 Index added 2.1 per cent on Wednesday and is within 1.1 per cent of its pre-Brexit close.

Futures on the S&P 500 Index rose 0.6 per cent after the U.S. benchmark jumped 1.8 per cent in the last session, its best performance in almost four months. Investors will parse Commerce Department data that Wednesday showed consumer purchases moderated last month, after the biggest advance since August 2009, as American households realigned outlays with slower income growth.

The MSCI Asia Pacific Index climbed 1.8 percent as benchmarks advanced across the region. Japanese Prime Minister Shinzo Abe said Wednesday he will mobilize all possible measures to deflect the negative effects of the so-called Brexit vote.

The MSCI Emerging Markets Index climbed 1.4 per cent, extending Tuesday's 1.3 per cent advance. It is still heading for a 2.4 per cent quarterly losses, for the first decline since the period ended in September. Shares in South Korea, Taiwan, Indonesia and the Philippines led gains, rising at least 1 percent.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, slid 0.3 per cent following a 0.5 per cent loss in the last session, amid speculation about the path of Fed interest rates.

Sterling advanced for a second day against the dollar as investors await Britain's plan for its extrication from the 28- nations bloc.

"Markets have calmed down somewhat," said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. "We may see some short term continuation of the recovery in the pound if there is an increased chance of a new prime minister who can secure the access of the U.K. to the single market. But uncertainty is still high and market participants are jittery."

The MSCI Emerging Markets Currency Index added 0.7 per cent. Indonesia's rupiah added 0.1 per cent, extending this week's increase to 1.6 per cent and heading for the highest close in two months. The central bank said it will intervene in the foreign- exchange market to prevent the rupiah from gaining too much from a possible increase in inflows following a recently passed tax amnesty law.

The offshore yuan strengthened for the first time in five days, gaining 0.3 per cent in just over an hour. Chinese authorities intervened via banks to support the offshore yuan in morning trading, according to people with knowledge of the matter. The People's Bank of China didn't immediately respond to questions sent by fax from Bloomberg.

Gold recovered most of the previous session's losses, adding 0.7 per cent to US$1,320.97 an ounce on speculation that the Fed's interest rate policy will boost the precious metal's allure.

West Texas Intermediate crude climbed 0.9 per cent to US$48.27 a barrel, building on last session's 3.3 percent jump. U.S. oil inventories fell by 3.86 million barrels last week, the American Petroleum Institute was said to have reported, ahead of government data due on Wednesday.