By Rodrigo Campos
NEW YORK (Reuters) - Stock markets edged up on Wall Street and Europe on Tuesday, supported by growing U.S. retail sales, though gains were capped by caution ahead of a possible rate increase by the U.S. central bank later in the week, which would be its first in nearly a decade.
The U.S. dollar index <.DXY> advanced the most in two weeks.
The Federal Reserve will end a two-day meeting on Thursday with a decision on monetary policy.
Worries about slowing Chinese and global growth and the prospect of higher U.S. borrowing costs have weighed on markets for weeks, but some expect the Fed to raise interest rates as a confirmation that the U.S. economy doesn't need supportive measures from the central bank.
Recent data points to "enough downside risks to the outlook for the Fed to justify waiting until October to hike," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
"I expect the Fed will stay pat on rates on Thursday, but signal that there will be a press conference after each meeting going forward to put every meeting in play for a hike."
Such a move will shift focus to the October meeting of Fed policymakers, with talk so far having been about the September or December meetings as key for a possible change in policy.
The Dow Jones industrial average <.DJI> rose 151.89 points, or 0.93 percent, to 16,522.85, the S&P 500 <.SPX> gained 16 points, or 0.82 percent, to 1,969.03 and the Nasdaq Composite <.IXIC> added 38.99 points, or 0.81 percent, to 4,844.76.
The pan-European FTSEurofirst 300 <.FTEU3> index was up 1.1 percent and MSCI's gauge of major equity markets globally <.MIWD00000PUS> gained 0.55 percent.
Overnight, Shanghai stocks fell 3.55 percent <.SSEC> as growth concerns in the world's second-largest economy linger.
RISK ON, FOR NOW
Trading in U.S. Treasuries was thin ahead of the Fed meeting, but prices slipped after retail sales data and as risk appetite rose.
The Commerce Department said U.S. consumer spending grew at a fairly healthy pace over the past two months, but factory production slipped in August, providing the Fed a mixed economic picture before its policymakers meet this week.
U.S. 30-year Treasury bonds > were last down 1-10/32 in price to yield 3.014 percent, from a yield of 2.946 percent late Monday. Benchmark 10-year Treasury notes > were last down 14/32 in price to yield 2.229 percent, from a yield of 2.18 percent Monday.
The yen >, traditionally investors' safe haven of choice in times of turbulence, was little changed after rising as much as 0.7 percent and falling 0.4 percent. The Bank of Japan held policy steady at the end of a two-day meeting.
The euro gave up about 0.4 percent against the greenback at $1.1276 >.
U.S. crude futures prices
(Editing by Bernadette Baum)
