* Fed outlook, U.S. bank test results boost sentiment
* European shares extend rally, led by banks
* U.S. dollar hits 11-month high against yen
By Luciana Lopez
NEW YORK, March 14 (Reuters) - Global stocks and the dollar edged higher on Wednesday, boosted by a cautiously brighter outlook from the Fed and news that most U.S. banks passed stress tests.
European stocks rose to near eight-month peaks, and the dollar notched the latest in a series of 11-month highs against the yen. The greenback also reached its strongest against the euro in a month, buoyed by speculation that the Fed could be inching away from adding more stimulus to the world's biggest economy.
Key U.S. indices, however, opened only slightly higher after closing at multi-year highs in the previous session .
The U.S. Federal Reserve on Tuesday described the country's output as "expanding moderately," compared to the "modest" growth description in its previous statement. Many analysts took the view that a further round of asset buying by the U.S. central bank is now less likely.
Separately, the Fed also said on Tuesday that most of the largest U.S. banks passed their annual stress test in a report that underscored the recovery of the financial sector but called out a few laggards, including Citigroup Inc.
"The stress tests kind of marked the unofficial end of the 2008 financial crisis," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
"There is a lot of news in the market in the last couple of days of a global nature," Meckler said, referring to the Greek debt crisis and the Fed's policy statement.
"Given the fact the market has rallied so far, you have investors coming in today and trying to consider what the next phase for the market will be," he added.
Hints of a brighter outlook crept across the Atlantic as a slight rise in euro zone industrial production data for January ended two consecutive monthly falls and pointed towards the bloc's eventual recovery.
The Dow Jones industrial average gained 15.44 points, or 0.12 percent, to 13,193.12. The Standard & Poor's 500 Index dropped 0.14 points, or 0.01 percent, to 1,395.81. The Nasdaq Composite Index gained 2.56 points, or 0.08 percent, to 3,042.44.
The FTSEurofirst 300 pan-European index of top European shares was 0.73 percent higher at 1,103.32 and hit its highest intraday level since July 26, while the MSCI world equity index rose 0.17 percent.
The dollar rose 0.83 percent to 83.56 yen. The euro weakened 0.24 percent to $1.3050, its lowest since Feb. 16.