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GLOBAL MARKETS-Dollar gains, shares firm as markets await Fed
June 18, 2013 / 2:47 PM / 4 years ago

GLOBAL MARKETS-Dollar gains, shares firm as markets await Fed

* Asset classes around the world focus on Fed meeting
    * World shares flat, Fed statement due Wednesday
    * Dollar rises vs yen and other major currencies
    * Brent crude rises above $106


    By Leah Schnurr
    NEW YORK, June 18 (Reuters) - The dollar rose and U.S. and
European equity markets pushed higher on Tuesday as investors
fixed their attention on the future of U.S. monetary policy
ahead of the Federal Reserve's policy meeting.
    The U.S. central bank kicks off a two-day gathering on
Tuesday, with global markets across asset classes on high alert
for any guidance on when and how quickly it may wind down its
bond buying program. The central bank issues its policy
statement on Wednesday, which will be followed by a news
conference by Chairman Ben Bernanke.
    Wall Street opened little changed before extending gains
about an hour into trading, while European shares edged higher.
   The Fed meeting has taken on greater significance since
Bernanke said in May stimulus plans could be scaled back if the
U.S. economy gains momentum, comments which have thrown a wrench
in this year's equity market rally.
    The Fed's policy won't show major changes after the meeting,
according to Todd Salamone, director of research at Schaeffer's
Investment Research in Cincinnati.
    "They won't do anything in this meeting and I think the data
supports that," Salamone said. "We remain in a holding pattern
until the policy statement is released."
     The Dow Jones industrial average gained 102.97
points, or 0.68 percent, to 15,282.82. The Standard & Poor's 500
Index rose 8.59 points, or 0.52 percent, to 1,647.63. The
Nasdaq Composite Index climbed 20.35 points, or 0.59
percent, to 3,472.48. 
    European shares were up 0.1 percent. Stocks found
some support in a rise in investor sentiment in Germany that
suggested Europe's largest economy is on the slow road to
recovery. But it was only a brief distraction ahead of the Fed.
 
    U.S. equities took little direction from data that showed
U.S. consumer prices rose in May and a gauge of underlying price
pressures showed signs of stabilization after a long decline.
That could be encouraging to Fed policymakers who would like to
see stronger inflation. 
    But the rise in consumer prices was slightly weaker than
economists had expected and weighed on U.S. Treasuries prices,
with bond investors also focused on the Fed.     
    Benchmark 10-year Treasuries were last down 5/32
in price to yield 2.21 percent. Thirty-year bonds 
fell 6/32 in price to yield 3.37 percent.
    
    The dollar, which should gain from any hint of an early Fed
tapering, rose against most other major currencies and recovered
from a recent two-month low against the Japanese yen, gaining
1.1 percent to 95.51 yen. 
    HSBC strategist Daragh Maher expects Bernanke to emphasize
that any scaling back of Fed stimulus will depend on data.
"While this should be generally dollar bullish, if volatility
rises it could see dollar/yen lose ground."
    The U.S. economic data helped boost Brent crude above $106 a
barrel as it eased some concerns over what the Fed may signal.
Brent rose 67 cents to $106.14, while U.S. oil 
was up 55 cents at $98.32.
    "If the Fed takes away the stimulus, it will boost the
dollar and potentially push oil prices down, but a lot has been
priced in already," said Simon Wardell, analyst at Global
Insight.
    "The Fed will try to do it as gradually as possible to avoid
a shock so the impact on oil will probably be minimal." 
    In the debt markets, German government bonds fell in line
with U.S. Treasuries on expectations the Fed may signal it is
moving closer to trimming its bond purchases. 
    Germany's ZEW business sentiment survey showed an uptick in
the mood in Germany, as expected, though its impact was limited,
coming a day after the Bundesbank said it saw a summer slowdown.
 
    Elsewhere figures showed car sales in Europe plunged to the
lowest level in two decades last month.

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