LONDON – Stocks were little changed on Tuesday as investors braced for more hefty interest rate hikes from central banks to quell inflation, with Sweden setting the tone ahead of its US, Swiss and British counterparts later in the week.

The dollar was steady near a two-decade high versus major peers, crude oil prices were little changed, and euro zone bond yields hit new multi-year highs on concerns over high energy prices.

Asian and European bourses used a tailwind from Monday's advance on Wall Street to chalk up modest gains, with the STOXX index of 600 European companies flat.

The benchmark is down about 16 percent for the year as fallout from the conflict in Ukraine and rising borrowing costs fuel recession fears.

The MSCI all country stock index was 0.2 percent ahead, leaving it down about 20 percent from a lifetime high in January. US stock futures, the S&P 500 e-minis, advanced 0.22 percent.

Sweden's central bank hiked rates by a greater than expected full percentage point on Tuesday and warned of more to come. The Fed is also expected to raise rates when a two-day meeting ends on Wednesday, with the Bank of England anticipated to hike on Thursday. 

"Tighter monetary policy around the world will increase the headwinds for risk assets – after all, central bankers are deliberately trying to slow aggregate demand," ING bank said.

Markets are priced for rates to climb as high as 4.5 percent by early 2023, compared with the Fed's current 2.25 percent-2.5 percent policy rate range. 

Luca Paolini, chief strategist at Pictet Asset Management, said the US central bank would likely ease the pace of hikes going into next year.

"The market, in a way, is probably expecting a peak in rates," Paolini said, adding that market focus would then switch to how higher rates were affecting economies and company earnings.

"We haven't seen it yet fully, I believe, as significant downgrade in earnings which I think will come. The downside for bonds is limited," Paolini said.

Inverted yield curves or long-term interest rates below short-term rates, were also a red flag historically to buying shares, he added.

On Monday, the S&P 500 gained 0.69 percent, the Nasdaq added 0.76 percent while the Dow Jones Industrial Average rose 0.64 percent.

Higher interest rates have caused a sell-off in government bonds. The yield on benchmark 10-year Treasury notes was at 3.5082 percent after hitting 3.518 percent on Monday, its highest level since April 2011.

The two-year US yield , a barometer of future inflation expectations, touched 3.9664 percent after climbing to a fresh almost 15-year high of 3.970 percent.

Higher US Treasury yields have helped strengthen the dollar and made gold less attractive.

The dollar index, which measures the currency against six counterparts, was 0.128 percent stronger at 109.680.

Spot gold was traded at US$1,670 per ounce, down 0.3 percent.

US crude ticked up 0.3 percent to US$86.01 a barrel. Brent crude rose 0.4 percent to US$92.48 per barrel.