By David Randall

NEW YORK (Reuters) – World stocks rallied on Monday to their highest levels since mid-December after China reopened its borders while benchmark Treasury yields drifted lower as investors scaled back expectations for further rate hikes by the Federal Reserve.

The gains were broad across equity markets, with Europe’s STOXX 600 near a one-month high and emerging market stocks up 2.4% on the day. MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest in more than six months.

“The market is reading that wage pressures are easing quite rapidly and seeing that as positive and potentially people (are) whispering the words ‘soft landing’ more loudly now,” said Hani Redha, global multi-asset portfolio manager at PineBridge.

A soft landing is the ideal Fed policy goal after raising interest rates, a situation in which inflation slows but there are not enough job losses to trigger a recession.

Monday’s rally was a continuation of strong gains Friday following U.S. jobs data that showed a jump in the workforce and easing wage growth. This, along with data pointing to a U.S. service sector contraction, was interpreted by investors as an indication the Fed could become less hawkish.

Asian stocks rose after China reopened its borders, bolstering the outlook for the global economy.

On Wall Street, the Dow Jones Industrial Average rose 223.79 points, or 0.67%, to 33,854.4, the S&P 500 gained 47.81 points, or 1.23%, to 3,942.89 and the Nasdaq Composite added 223.95 points, or 2.12%, to 10,793.25.

MSCI’s gauge of stocks across the globe gained 1.57%.

Money markets were pricing in a 25% chance of a half-point U.S. rate hike in February, down from around 50% a month ago. Investors will look to Thursday’s CPI data for further clues as to the Fed’s next move.

The U.S. dollar index was down around 0.8%, near its lowest in seven months after it dropped 1.2% on Friday.

In bond markets, European government bond yields rose, in a reversal after the previous weeks’ sharp falls. Germany’s benchmark 10-year government bond yield was up 4 basis points at 2.252%.

The yield on 10-year Treasury notes was down 5.2 basis points to 3.519%. Bond yields move in the opposite direction of prices.

“Investors are operating under the assumption that once the Fed pauses, the only next possible outcome would be a cut – and if futures pricing is to be believed, the market sees the first cuts by year-end,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

U.S. crude recently rose 1.79% to $75.09 per barrel and Brent was at $79.83, up 1.6% on the day.

(Reporting by David Randall; Editing by Susan Fenton and Chris Reese)