By Sinead Carew
NEW YORK (Reuters) - U.S. and European shares rebounded after several down days on Wednesday on hopes for progress around an expected meeting between Greek, German and French leaders on Greece's debt crisis, while oil rose for a second day.
The dollar fell against the yen and the euro and U.S. Treasury yields tracked German Bund yields higher, also helping to drive U.S. equities up.
"We're seeing something today we've not seen in weeks. We're seeing conviction," said Peter Kenny, chief market strategist at Clearpool Group in New York, also citing expectations of strong U.S. economic data later this week and hopes for progress in Greek debt negotiations.
Strong data would help the case for a U.S. interest rate hike sometime this year, and this prospect was helping the benchmark S&P 500's financial sector <.SPSY>, which was one of the S&P's best-performing sectors on Wednesday, Kenny said.
"With rising rates, even a modest move higher, financials stand to gain," he said.
More From This Section
A spokesperson for Chancellor Angela Merkel said Germany will only accept a cash-for-reform deal between Greece and its international creditors with approval from all three lenders, according to a spokesperson for Merkel.
Some investors drew optimism from the prospect of a meeting between Merkel, French President Francois Hollande and Greek Prime Minister Alexis Tsipras slated for later on Wednesday.
"The market is rebounding on a faint interpretation of things looking a little better," said Stephen Freedman, senior investment strategist at UBS Wealth Management America. "This would be at the top level adding a different angle to the talks which otherwise appeared to be stalling."
At 2:19 p.m. the Dow Jones industrial average rose 261.76 points, or 1.47 percent, to 18,025.8, the S&P 500 gained 27.3 points, or 1.31 percent, to 2,107.45 and the Nasdaq Composite added 70.39 points, or 1.4 percent, to 5,084.25.
The pan-European FTSEurofirst 300 share index closed up more than 1.7 percent compared with a 1.4 percent rise for the MSCI all world stock index .
The dollar slipped to two-week lows against the yen after Japan's chief central banker said the yen was "very weak" and unlikely to fall further, prompting investors to trim huge bets against the Japanese currency.
By late afternoon the dollar was down 0.5 percent against a basket of major currencies while the euro was up 0.3 percent against the greenback.
A selloff of German Bunds and this week's hefty corporate and government debt supply propelled longer-dated U.S. Treasuries yields to their highest in more than seven months.
"We are completely tracking Bund yields," said Mike Cullinane, head of Treasuries trading at D.A. Davidson in St. Petersburg, Florida.
Oil prices rose after U.S. government data confirmed a big weekly drawdown in crude inventories and on signs that U.S. oil production growth was levelling off after several years of sharp increases.
U.S. crude was up 1.4 percent at $60.99 while Brent rose 0.7 percent to $65.31.
(Additional reporting by Richard Leong and Michael Connor in New York; Editing by Nick Zieminski and Meredith Mazzilli)