* Upbeat earnings activity boosts U.S., European shares
* Euro falls on below-forecast German inflation data
* Draghi cools ECB QE talk; Fed to begin policy meeting
* U.S. bond yields rise as Apple prepares huge bond deal (Updates market action,)
By Richard Leong
NEW YORK, April 29 (Reuters) - World stock indexes rose on Tuesday on solid company earnings, while the euro slipped as weaker-than-expected German inflation data kept alive chances of more stimulus from the European Central Bank.
Worries about Ukraine moved to the back burner, for now, after the United States and European Union imposed more sanctions on Russia for its role in backing the separatist movement in eastern Ukraine.
Relief that the West's broadened sanctions on Moscow were limited led some investors to step back into stocks and other risky assets and to pare safe-haven holdings in gold and U.S. and German government debt.
U.S. and German benchmark yields rose to 2.70 percent and 1.50 percent, respectively. U.S. bond yields were also under pressure on a bond offering from iPhone maker Apple which may raise $8 billion to $10 billion, according to IFR, a unit of Thomson Reuters.
Oil prices rebounded after posting their biggest fall in a month as traders focused on the ongoing violence in eastern Ukraine and a possible delay in U.S. relaxation of sanctions on Iran later this year.
"The Ukraine situation played an important role here. The tension there has been diffused for now. You have some decent earnings in the U.S. and Europe as well," Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York, said of the gains in equities.
Upbeat news from Finnish telecom giant Nokia and German chipmaker Infineon inspired European stock markets, while encouraging results from U.S. drugmaker Merck and mobile provider Sprint helped Wall Street open higher.
The equity-friendly tone to markets on Tuesday was helped by news Britain's economy grew at a solid 0.8 percent pace in the first quarter, giving an annual growth rate of 3.1 percent, the fastest since 2007.
Private data showed U.S. home prices grew at a solid clip in February, though Americans' confidence in the economy dipped in April from the highest in more than six years set in March.
In midday trading, the Dow Jones industrial average rose 106.41 points or 0.65 percent, to 16,555.15, the S&P 500 gained 10.86 points or 0.58 percent, to 1,880.29 and the Nasdaq Composite added 36.844 points or 0.9 percent, to 4,111.245.
The FTSEurofirst 300 index of top European shares provisionally closed up 1.2 percent at 1,352.41, while Tokyo's Nikkei earlier closed down 1 percent.
With the gains in the U.S. and Europe, the MSCI world equity index, which tracks shares in 45 nations, rose 0.57 percent.
Investors also took cues from the mixed signals on whether European policy-makers will ease policy in the coming weeks and months to fight off the threat of deflation.
ECB President Mario Draghi told German lawmakers on Monday that further monetary easing in the form of bond-buying remains some way off. [ID:nB4N0MZ00E}
A report due on Wednesday is expected to show inflation in the euro zone picking up to 0.8 percent in April, but that would still be well below the ECB's medium-term target of just below 2 percent. An omen of another below-target reading came on Tuesday when Germany said its annual inflation was 1.1 percent in April but less than the 1.3 percent rise expected.
"This will spark hopes the ECB will conduct another round of unconventional policy. The ECB may not have a choice," Newedge's Batenburg said.
Central bank purchases of bonds, such as those the Federal Reserve has conducted and begun to dial back, are designed to hold down long-term interest rates and bolster economic activity. But they also erode the country's currency.
The euro was down 0.3 percent at $1.3806 and off 0.2 percent at 141.65 yen.
The dollar index, a measure of the greenback's value against six major currencies, rose 0.2 percent at 79.823.
As traders speculate on the ECB's next move, the Fed will begin a two-day policy meeting on Tuesday, and is expected to trim its bond-buying stimulus further.
In commodity markets, Brent crude was up $1.05, or 0.97 percent, at $109.17 a barrel, and U.S. crude was last up 52 cents, or 0.52 percent, at $101.36 per barrel.
Spot gold prices erased earlier gains, dipping 31 cents or 0.02 percent, to $1,295.29 an ounce. (Reporting by Richard Leong; additional reporting by Jamie McGeever, Marius Zaharia and Tricia Wright; Editing by Alison Williams, Dan Grebler and Meredith Mazzilli)