* MSCI world equity index up 0.3 pct at 327.21
* China's reserve measures calm jitters
* Euro rises; Treasuries stabilise
By Natsuko Waki
LONDON, Dec 14 (Reuters) - The dollar fell to a three-week
low against the euro and Treasuries steadied ahead of a Federal
Reserve policy meeting on Tuesday, while stocks held near a
two-year peak, supported by optimism over Chinese growth.
Fed officials are expected to assess its latest $600 billion
bond-buying programme but not signal any shift in its buying
intentions, even though a planned extension of tax cuts could
provide a boost to the economy. []
Monday's news on China extending special reserve
requirements for top banks supported world stocks and
commodities as expectations rose Beijing is unlikely to
aggressively cool down its economy at a time when the rest of
the world relies on China's robust growth.[]
In Europe, the benchmark index slipped before the Fed
meeting while U.S. stock futures pointed to a steady open on
Wall Street later.
"Investors are cautious ahead of the Fed as economic data
has been strong since the announcement and (they) wonder if
quantitative easing is needed," said Philip Isherwood, European
equities strategist at Evolution Securities.
"There are also worries about the impact on inflation. It is
unlikely the Fed is going to do anything to modify (policy) as
early as this meeting."
MSCI world equity index <.MIWD00000PUS> and the Thomson
Reuters global stock index <.TRXFLDGLPU> both rose around a
third of a percent. The MSCI index is just below a two-year high
set in November.
The FTSEurofirst 300 index <> was down 0.2 percent.
Emerging stocks <.MSCIEF> added 0.6 percent.
Chinese stocks rose 0.1 percent <>. A leading official
newspaper reported China will probably target a limit of about
7.5 trillion yuan ($1.1 trillion) in new loans next year, an
indication that policy could be slightly looser than expected.
U.S. crude oil <CLc1> rose 0.2 percent to $88.78 a barrel.
German government bond futures <FGBLc1> rose 0.2 percent.
U.S. Treasuries steadied after a turbulent session on Monday
that took the benchmark 10-year bond yield to a six-month high
of 3.39 percent briefly.
Treasuries have suffered a sharp sell-off since a tax deal
between President Barack Obama and Republican lawmakers sparked
concerns over a widening federal budget gap while also boosting
hopes for U.S. economic growth.
"A more robust U.S. growth outlook has taken over the mantle
of market leadership," Goldman Sachs said in a note to clients.
"The co-movement of both yields and equities higher supports
the view that it is growth optimism not fiscal worries behind
the bond market move, as does the fact that the bond market move
has been driven in large part by real rates."
The dollar <.DXY> fell 0.3 percent against a basket of major
currencies.
The euro rose to a three-week high of $1.3498 <EUR=>,
showing little reaction to Standard & Poor's move to downgrade
Belgium's credit rating outlook to negative.
(Editing by Ruth Pitchford)
