World stocks climbed for the third day in a row on Tuesday as investors bet governments would succeed in ending the credit crisis and in controlling the global economic downturn.

The euro hit 1-1/2 year lows against the dollar.

Sentiment was boosted overnight by comments from U.S. Federal Reserve Chairman Ben Bernanke, who backed government spending as a fresh measure to boost the U.S. economy.

Interbank lending rates were also fixed lower on Monday, fuelling a belief that government rescue plans were beginning to free up frozen money markets.

MSCI's all-country world stock index .MIWD00000PUS, a broad measure of global stock market performance, rose for the third trading day in a row and was nearly 12 percent above five year lows hit on October 10.

It remains down 39 percent year-to-date, however.

"The market wants some kind of concrete economic steps, jointly if necessary, and Bernanke's comments have raised hopes that something will be forthcoming," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management in Japan.

European shares rose in early trade, also extending their winning streak to a third day, with investors cheered by Bernanke and French government moves to bolster its banks.

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