On Thursday, US stocks indices advanced as investors embraced the Federal Reserve's bullish economic outlook. They also downplayed the risk of turmoil in China's debt markets.

The S&P 500 index posted its biggest two-day gain since May, jumping by 2.5%. On Wednesday the Fed said it was going to start reducing asset purchases this year amid positive signs of economic recovery in the US. Yields climbed globally. In the UK, 10-year government bond yields exceeded 0.90% for the first time since May. Treasuries rose after the Bank of England hinted at raising key rates in 2021 to contain a surge in inflation. Apart from that, the 30-year government bond yield also jumped by more than 12 basis points, the biggest monthly gain.

"A hawkish Fed was surprisingly welcomed by equity markets as it was seen as a confirmation of continued strength and 'substantial progress' made by the economy in recovering from the COVID shock. While we are far from the end of QE and near-zero rates, the tide seems to be beginning to change. So far, the market had welcomed bad news as good news, but a market reacting to signs of an economy able to stand on its own without the monetary policy crutches is a refreshing change," Anu Gaggar, the global investment strategist at Commonwealth Financial Network, said.

Even with Thursday's jump in yields, there is growing confidence that markets will be able to ride out a pullback in Fed stimulus unlike in 2013. At that time, the taper tantrum triggered large losses in bonds and equities. Investors are betting that the economic and profit recovery will be strong enough to outweigh the reduction in asset purchases, while ultra-low rates will continue to support riskier assets. It is likely to occur despite the fact that concerns about China's real-estate woes weigh on market sentiment.

"The turbo-charged taper -- a little bit of a surprise, it was coming in a relatively short period that they're planning for this, but the markets are OK with that at the end of the day," Paul Donovan, UBS's global chief economist, said in a Bloomberg TV interview.

Shares declined during the European session after a report that China's government expressed an unwillingness to bail out Evergrande. Notably, Beijing has invested more money in the financial system, while regulators warned the real estate developer to avoid a short-term default

Fears of an Evergrande insolvency triggered a sharp rise in borrowing costs for other junk-rated Chinese developers. It may also affect the health of some smaller Chinese banks.

Here are key events for tomorrow:

- Fed Chair Jerome Powell, Fed Governor Michelle Bowman, and Vice Chairman Richard Clarida discuss economic recovery after the pandemic;

- The ifo Business Climate Index, Germany