By Amanda Cooper

LONDON (Reuters) - Global shares rose on Tuesday, driven by a recovery on Wall Street, where investors focus on earnings reports from the U.S. megacaps, while the yen hit a new 34-year low against the dollar, prompting a warning from Japanese officials.

The MSCI All-World index, which on Friday hit a two-month low, was up 0.3%, lifted by gains in Europe, where the scaled a record high, while the traded at one-week highs thanks to the technology sector.

Adding to the optimism was a series of surveys of business activity that showed Germany returned to growth in early April after months of contraction, while activity in the broader euro zone expanded at its fastest clip in nearly a year.

Investors are less concerned right now about the threat of a major re-escalation of tension in the Middle East and more focused on earnings.

Against that backdrop, gold is heading for a week-on-week drop of 3.2%, its largest this year, while oil has backed off last week's highs.

"We are turning a bit more positive on risk sentiment. There still remains a fair bit of uncertainty around geopolitics and rising U.S. real yields, but we are more positive than we were a week ago," Mohit Kumar, a strategist at Jefferies, said.

The dollar retreated from its recent highs, but is comfortably supported by the view among investors that no rate cuts will be forthcoming any time soon from the Federal Reserve and by the climb this month in Treasury yields to their highest since November.

On Wall Street, big tech shares outperformed ahead of quarterly results this week, sending the Nasdaq 1.1% higher. AI darling Nvidia (NASDAQ:) gained 4.4% while Amazon.com (NASDAQ:) rose 1.5% and Alphabet (NASDAQ:) jumped 1.4%, although Tesla (NASDAQ:) dropped 3.4% after it cut prices in its major markets.

Tuesday brings a wealth of big-cap earnings, including Tesla, PepsiCo (NASDAQ:), UPS, (NYSE:) and Halliburton (NYSE:)

"Odds are the earnings reports that we see over the next few weeks will be positive, but obviously there's still issues around what the Fed will do the next," said Shane Oliver, chief economist at AMP (OTC:), noting that security concerns also remained. "It's too early to say that problems in the Middle East have gone away."

"There are lots of things that could cause volatility between now and the end of the year. And so we're probably coming to a more constrained, more volatile period for markets."

Aside from Tesla, Meta Platforms (NASDAQ:), Alphabet and Microsoft (NASDAQ:) will release earnings this week.

MEGA WOBBLE?

UBS on Monday downgraded its rating on the mega-cap companies, warning that profit growth momentum of the so-called Big Six technology stocks could "collapse" over the next few quarters.

U.S. business activity, quarterly economic growth and a measure of monthly inflation top the macro data bill this week.

Traders now expect the first Fed rate cut to come most likely in September and see just 40 basis points' worth of cuts this year, compared with expectations for 150 bps of cuts at the beginning of the year.

Treasuries have been a big casualty of the shift in thinking. The yield on the two-year note, the most sensitive to changes in rate expectations, was up 1.8 bps at 4.898%.

In Europe, the picture is different. The European Central Bank is expected to cut in June and this divergence is weighing on the euro. It was last up 0.14% at $1.0667, not far off last week's five-month low of $1.0601.

The yen slid to another 34-year low on Tuesday, but recovered modestly to trade flat at 154.79 to the dollar.

Japan's finance minister Shunichi Suzuki said last week's trilateral meeting with his U.S. and South Korean counterparts laid the groundwork for Tokyo to take appropriate action in the foreign exchange market.

This is the clearest warning yet from Japanese monetary authorities that tolerance for the slide in the currency is wearing thin and official intervention to prop it up is likely.

Oil pared earlier gains and fell modestly as investors continued to assess the situation in the Middle East. futures were last down 0.4% at $86.63 a barrel, while fell 0.5% to $81.49.

Gold fell for a second day, dropping 1% to $2,320 an ounce, after shedding 2.7% the day before, as investors took profit on the 12% rally in the price so far this year.