World stock markets shot higher on Monday, bouncing back from last week's heavy selloff as worries about early interest rate hikes faded and U.S. Treasury yields receded.

Major U.S. indices surged as investors greeted weekend approval of the Johnson & Johnson vaccine in the U.S. and congressional progress on U.S. President Joe Biden's $1.9 trillion economic package, which passed the House early Saturday morning.

"It looks like investors are getting back to work in stocks," JJ Kinahan, chief market strategist at TD Ameritrade, said in an analysis.

"Worries about higher interest rates seem to be waning – for now, anyway – as the 10-year Treasury pulls back, allowing stocks to rally on vaccine and stimulus optimism."

The broad-based S&P 500 jumped by 2.4 percent to 3,901.82, its best session since June as the yield on the 10-year U.S. Treasury note declined somewhat.

Higher U.S. Treasury bond yields last week sparked worries about inflation and a sudden shift in Federal Reserve policy.

But Sam Stovall, chief investment officer at CFRA Research, observed in a note that even with the recent rise in treasury yields, interest rates remain "anemically low" by historical standards.

"History indicates, but does not guarantee, that rising rates reflect the optimism surrounding an improving economy and will need to move much higher before causing concern by forcing the Fed's hand in hiking short-term rates sooner than anticipated," Stovall said.

In Europe, London, Frankfurt and Paris all closed the day 1.6 percent higher following a strong session in Asia.

"Equity markets have shaken off the negative sentiment that was doing the rounds last week as the pullback in government bond yields has seen buyers step into the fold," said analyst David Madden at online trading firm CMC Markets UK.

In a bid to calm markets after last week's volatility, several central banks – including in Japan, South Korea and the European Union – sought over the weekend to reiterate their pledges to maintain their ultra-loose monetary policies for as long as needed.

Australia's led the way by ramping up its asset purchases to keep rates low.

Federal Reserve officials, including Chair Jerome Powell, have repeatedly signaled they expect only moderate inflation and do not foresee increasing interest rates quickly.

Oil prices pulled back somewhat ahead of a meeting last week of OPEC and other leading oil producers. Many analysts expect the group to boost output somewhat, but not significantly given continued economic uncertainty.