Sterling rallied Tuesday on fresh hope that British Prime Minister Theresa May would avoid a chaotic no-deal Brexit, while global stock markets recovered.

As Wall Street shrugged off more weak economic data to push higher, the pound jumped as high as $1.3262 in London morning deals, before tempering the gains by the afternoon.

The euro fell as low as 85.25 pence on hopes of an orderly departure from the European Union on April 12.

The long-running saga took a fresh twist after Brexit hardliner Jacob Rees-Mogg declared on Twitter: "The choice seems to be Mrs May's deal or no Brexit."

Rees-Mogg, head of the European Research Group of eurosceptic lawmakers and an MP for May's Conservatives, also said in a political podcast interview that "the PM will not deliver a no-deal Brexit."

Oanda analyst Craig Erlam said it had been clear for months that "May's strategy has been to corner sceptics into backing her deal".

- Perking up -

"The idea that the risk of no deal or no Brexit would be enough to win enough votes may be starting to bear fruit just as parliament seeks to wrest control of the process," he told AFP.

"Securing the backing of a high profile ERG member like Rees-Mogg -- albeit reluctantly -- could dramatically improve May's numbers. It's now just a question of whether it's too little too late."

The remarks came a day after Britain's parliament seized the initiative in a historic vote to give MPs a broader say on what happens next, creating time to come up with their own Brexit proposals as Britain tries to stave off a messy divorce in two weeks.

They will now choose whether to revoke Article 50 and cancel Brexit, hold another referendum, vote for a deal including a customs union and single market membership, or leave the EU without a deal.

However, even if they decide a majority course of action, the government is not legally bound to follow their instructions.

The move came after May admitted she still had not secured the votes needed to get her Brexit deal through parliament.

- Stocks brighten -

While equity markets have bounced, there is a lot of uncertainty about the state of the global economy / © AFP

Meanwhile global stocks rebounded after the previous day's losses in many markets, though dealers trod cautiously, still reeling from Monday's pummeling which came on the back of a drop in benchmark 10-year Treasury bond yields below those for three-month bills for the first time since before the global financial crisis.

This so-called inverted yield curve shows investors are more willing to buy long-term debt -- usually viewed as a higher risk -- as they consider the short-term outlook more hazardous. That flip has preceded several recessions in recent decades.

After last week's rout and more struggles Monday, Wall Street posted solid gains, despite disappointing data on US home construction and consumer confidence. The S&P 500 gained 0.7 percent, off the day's high point.

Apple slipped more than one percent after an International Trade Commission judge ruled the company violated a patent held by chipmaker Qualcomm and recommended banning imports of some iPhone models.

Paris stocks outperformed their peers after the French government reported its lowest budget deficit as a percentage of GDP in 12 years, and the Insee national statistics office upped its forecast for French growth.

London, meanwhile, was held back by sterling's strength which tends to penalize multinationals generating much of their earnings in foreign currencies.

- Key figures around 2030 GMT -

New York - DOW: UP 0.55 percent to 25,657.73 (close)

New York - S&P 500: UP 0.72 percent to 2,818.46 (close)

New York - Nasdaq: UP 0.71 percent to 7,691.52 (close)

Pound/dollar: UP at $1.3201 from $1.3195 at 2100 GMT on Monday

Euro/pound: DOWN at 85.31 pence from 85.75 pence

Euro/dollar: DOWN at $1.1264 at $1.1312

Dollar/yen: UP at 110.55 yen from 109.97 yen

London - FTSE 100: UP 0.3 percent at 7,196.29 points (close)

Frankfurt - DAX 30: UP 0.6 percent at 11,419.48 (close)

Paris - CAC 40: UP 0.9 percent at 5,307.38 (close)

EURO STOXX 50: UP 0.6 percent at 3,319.53

Tokyo - Nikkei 225: UP 2.2 percent at 21,428.39 (close)

Hong Kong - Hang Seng: UP 0.2 percent at 28,566.91 (close)

Shanghai - Composite: DOWN 1.5 at 2,997.10 (close)

Oil - Brent Crude: UP 85 cents to $68.06 per barrel

Oil - West Texas Intermediate: UP $1.23 to $60.05