(Adds U.S. market open, byline, dateline; previous LONDON)
* World stocks extend gains to new record
* Dollar steady on improved risk appetite
* Oil edges higher as OPEC output falls
* German Bund yield set for biggest daily jump since July
By Herbert Lash
NEW YORK, Sept 12 (Reuters) - The S&P 500 and a gauge of global equity markets hit new highs on Tuesday as the feared impact of Hurricane Irma waned and the easing of tensions with North Korea helped drive a sell-off in global bond markets.
The U.S. dollar clung to its gains, helped by the bounce in government debt yields and ahead of U.S. inflation data that could influence the timing of the next Federal Reserve interest rate hike.
European shares rose to a five-week high, extending the relief bounce seen in the previous session and Wall Street advanced, led by gains in financial and industrial stocks.
MSCI's all country world stock index, which tracks more than 2,400 stocks in 47 countries, rose 0.26 percent after it jumped 0.9 percent on Monday, its fourth-biggest gain so far this year.
"There's a relief factor, at least for the moment, that the North Korea situation has gone a little bit quiet and the fact that the hurricane over the weekend was not as bad as expected," said Dave Donabedian, chief investment officer of CIBC Atlantic Trust Private Wealth Management.
Investors also welcomed U.S. Treasury Secretary Steve Mnuchin's comments that he was hopeful for tax reform by year's end with a "competitive" rate for businesses, even if not at the 15 percent bracket backed by President Donald Trump, he said.
The Dow Jones Industrial Average rose 65.07 points, or 0.29 percent, to 22,122.44. The S&P 500 gained 6.22 points, or 0.25 percent, to 2,494.33 and the Nasdaq Composite added 10.32 points, or 0.16 percent, to 6,442.58.
The pan-European FTSEurofirst 300 index rose 0.54 percent to close at a preliminary 1,499.27. MSCI's index for emerging market stocks rose 0.27 percent.
European insurance companies rose again, climbing 0.8 percent.
The market mood was "risk-on," said Pierre Martin, a trader at Saxo Bank, adding the positive trend for banking stocks and automobile shares showed investors were keen on corporate and macroeconomic news rather than geopolitical and Irma worries.
U.S. long-dated Treasury yields hit two-week highs, rising for a third straight session while Germany's benchmark 10-year bond yield rose sharply and was set for its biggest daily rise since early July.
The benchmark 10-year U.S. Treasury note fell 13/32 in price to yield 2.169 percent. In Germany, Bunds were last up 5 basis points in price to yield 0.396 percent.
The greenback found support as investors further unwound bearish bets against it. The dollar index, which tracks the currency against a basket of six major rivals, rose 0.04 percent while the euro rose 0.09 percent to $1.1962.
The Japanese yen weakened 0.62 percent versus the greenback at 110.10 per dollar.
Oil prices rose almost 1 percent after OPEC said its output fell in August and forecast higher demand in 2018, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut.
The Organization of the Petroleum Exporting Countries also said the two hurricanes that have hit the United States in recent weeks would have a "negligible" impact on demand.
U.S. crude rose 0.42 percent to $48.27 per barrel and Brent was last at $54.22, up 0.71 percent on the day.
Reporting by Herbert Lash; Editing by Chizu Nomiyama