(Adds close of U.S. markets)
* MSCI world index, Wall Street extend rally to record highs
* Sweden ends five years of negative interest rates
* European bond yields rise; dollar mostly flat
* Oil prices hover near three-month highs
By Herbert Lash
NEW YORK, Dec 19 (Reuters) - Global equity markets extended a year-end rally on Thursday that has pushed U.S. and world stock benchmarks to record highs, while bond yields in Europe rose after Sweden stopped five years of negative interest rates, signaling the end of a sub-zero era.
Gold was little changed and the dollar was roughly flat as investors awaited U.S. gross domestic product data on Friday and investors shrugged off a report showing U.S. factory activity in the mid-Atlantic region has nearly stalled this month.
Stocks got a boost after U.S. Treasury Secretary Steven Mnuchin said the United States and China would sign their Phase One trade pact at the beginning of January. Mnuchin said it was completely finished and just undergoing a technical "scrub."
The market shrugged off President Donald Trump's impeachment, as the Republican-controlled U.S. Senate is widely expected to vote against removing him from office.
MSCI's gauge of stocks across the world gained 0.19%, lifting the global benchmark to a record high, while the three major equity indexes on Wall Street hit intra-day and closing record highs.
Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey, noted the market angst caused by the lack of a signed U.S.-China trade deal.
"That said, because we've gotten some positive comments from both Beijing and Washington, it seems we're likely close to getting a signing of the trade détente," she said.
U.S. stocks will maintain an upward bias until the start of 2020, when investors will look for more specific details in the trade agreement, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
The Dow Jones Industrial Average rose 137.68 points, or 0.49%, to 28,376.96. The S&P 500 gained 14.23 points, or 0.45%, to 3,205.37, and the Nasdaq Composite added 59.48 points, or 0.67%, to 8,887.22.
Stocks in Europe edged higher. The pan-regional STOXX 600 index rose 0.17%, and the blue-chip FTSEurofirst 300 index of regional shares closed up 0.14%.
Emerging market stocks lost 0.22%.
Earlier in Asia, stocks pulled back from a 1-1/2-year peak. Japan's Nikkei fell 0.3% and China's stocks slipped for a second session despite trade optimism.
Sweden's Riksbank raised benchmark borrowing costs to zero from -0.25%, making the central bank the first of those around the world that cut rates into negative territory to spur growth to inch back toward zero.
Bond yields rose across the euro zone. Those in higher-rated countries such as Germany, France and the Netherlands were up 3-4 basis points .
The yield on Germany's benchmark 10-year Bund rose to as much as -0.208%, a six-month high, up from -0.30% earlier in the week.
Policy rates are still negative at the European Central Bank and the Japanese, Danish, Swiss and Hungarian central banks. With the exception of Hungary, all are expected to remain so for some time.
Oil prices hovered near the highest in three months in thin pre-Christmas trading, buoyed by Wednesday's news that U.S. crude inventories declined and as U.S.-China trade tensions continued to ease.
Brent crude futures rose 37 cents to settle at $66.54 a barrel, heading for a sixth straight day of gains. U.S. West Texas Intermediate (WTI) crude settled up 29 cents at $61.22 a barrel.
The dollar index fell 0.01%, with the euro up 0.1% to $1.1122. The Japanese yen strengthened 0.20% versus the greenback at 109.32 per dollar.
The Swedish crown rose 0.09% versus the greenback at 9.41 per dollar.
Benchmark 10-year notes last rose 2/32 in price to yield 1.9169%.
U.S. gold futures settled 0.4% higher to $1,484.40 an ounce.
Reporting by Herbert Lash in New York additional reporting by Dhara Ranasinghe in London and April Joyner in New York editing by Chizu Nomiyama and Leslie Adler