 "World shares rally as Fed meeting nears, dollar firms")
Stocks on Wall Street and major European indices gained about 1% as investors anticipate the end of a two-day meeting of the US central bank on Wednesday, when investors hope to get a better idea on Fed policy from Chairman Ben Bernanke.
"The market's positioning itself ahead of the comments that will be coming from Chairman Bernanke," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.
The Fed meeting has taken on greater significance since Bernanke said in May that the US central bank may decide to pare back its bond buying in its next few meetings if the economy gains momentum.
Those comments halted a stock market rally and sparked a surged in Treasuries yields while igniting a dramatic uptick in volatility as investors tried to gauge the effects of a Fed reduction in its asset purchase program.
"The chairman will probably say something to the effect of the Fed will use every means at its disposal to make sure the economic growth we've seen continues," said Mata.
The Dow Jones industrial average was up 174.86 points, or 1.16%, at 15,245.04. The Standard & Poor's 500 Index was up 17.87 points, or 1.10%, at 1,644.60. The Nasdaq Composite Index was up 42.72 points, or 1.25%, at 3,466.28.
Also Read
The market built on its sharp gains after data showed US homebuilder sentiment jumped in June, rising above 50 for the first time since the start of the housing crisis in a vote of confidence for the sector's recovery.
"The market is beginning to adjust itself to an eventual trimming from the Fed toward the beginning of next year," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
The FTSEurofirst 300 index of top European shares rose 0.72% to close at 1,184.36, while MSCI's all-country world equity index rose 0.94%.
Despite the recovery, the rally for some did not look wholly convincing. The FTSEurofirst 300 is still down about 6% from its 2013 peak of 1,258.09 struck in late May.
"The rallies look corrective in nature. We don't see any new money participating in it," said Logic Investments' strategy head Peter Rice. "If anything, the risk still remains to the downside."
A report from the New York Fed showing growth in the New York state manufacturing sector picked up in June also supported US stocks, but the details were less encouraging as new orders and employment fell to their lowest levels in five months.
The dollar rose against the yen for the first time in five trading sessions as stock markets gained worldwide. Japan's Nikkei index jumped 2.7%.
But traders said range-trading is likely to dominate until the Fed's policy announcement on Wednesday.
The dollar briefly extended its gains after the New York state manufacturing report topped economists' expectations.
"The dollar has been selling off over the last week or so, so I think it probably has more room to gain than to lose," said John Doyle, currency strategist at Tempus Inc. in Washington.
The dollar rose 0.9% to 94.92 yen. The euro fell 0.07% to $1.3336.
Treasury prices pared early gains. The benchmark 10-year US Treasury note fell 4/32 in price to yield 2.1439%.
Brent crude oil initially rose above $106 per barrel as a superpower stand-off over the Syrian civil war intensified, raising the risk of conflict spilling into the Middle East oil-producing region. Crude later pared those gains to trade lower.
Brent crude oil futures for August fell 24 cents to $105.69 a barrel.
US light crude oil futures were flat at $97.85.