* MSCI world index up 0.62 percent
* World stocks up as oil loses ground
* Dollar flat vs euro as markets await Fed meeting outcome
By Burton Frierson
NEW YORK, June 25 (Reuters) - Stocks rose on both sides of
the Atlantic as falling oil prices tempered fears over rising
inflation and slowing economic growth while investors awaited
the outcome of a U.S. Federal Reserve meeting later on
Wednesday.
The widely held view in the markets was that the Fed would
hold interest rates steady at 2.0 percent for the first time
since it began a rapid easing cycle last September. Its
statement will provide key guidance for the future as the
central bank weighs rising inflationary concerns against a weak
economy.
Beaten-down financial and shares also benefited from deal
making and bargain hunting, but the buoyant mood in stocks hurt
U.S. and euro zone government bond prices. The Dow Jones
industrial average <> was up 51.95 points, or 0.44 percent,
at 11,859.38.
The dollar was steady against the euro after clawing back
earlier losses that came on comments from European Central Bank
President Jean-Claude Trichet, who warned that inflation risks
have risen and reiterated that policy-makers may lift euro zone
interest rates next month.
Hikes in the United States are not expected in the
immediate future so investors will zero in on the Fed's
post-meeting statement to see just how soon it would consider
tightening monetary policy and how big its inflation worries
have grown.
"With virtually no chance of a change in policy today, the
policy statement affords the (Fed) a vital opportunity to shape
market expectations," said Richard Iley, senior economist at
BNP Paribas in New York.
Oil <CLc1> fell after government inventory data showed a
surprise increase in domestic crude supplies last week, fueling
relief among equites investors worried that high commodities
prices were creating stagflationary conditions of low growth
and high inflation.
U.S. light sweet crude oil was down $4.17, or 3.04 percent,
to $132.83 per barrel. The drop in oil prices also undermined
gold <XAU=>, which fell $11.80, or 1.33 percent, to $877.60.
The Standard & Poor's 500 Index <.SPX> was up 11.66
points, or 0.89 percent, at 1,325.95. The Nasdaq Composite
Index <> was up 35.24 points, or 1.49 percent, at
2,403.52.
The MSCI main world equity index <.MIWD00000PUS> erased
early losses to gain 0.62 percent on the day.
In Europe, The pan-European FTSEurofirst 300 <> index
ended 1.1 percent higher at 1,227.65 points. Banks were the top
weighted gainers, with Barclays' <BARC.L> $8.9 billion share
issue giving the sector a lift.
Britain's No.3 bank, Barclays' said it was raising the
capital through a discounted share issue in which Qatar
Investment Authority, the country's sovereign wealth fund, and
Japan's Sumitomo MitsuiBanking <8316.T> will be major
investors.
Signs that the world's major banks are clearing up their
troubles from the credit crisis and raising new capital come at
a time when the global economy faces the threat of rising
prices from surging oil and commodity prices.
In Tokyo, the stocks picture was less rosy. Japan's Nikkei
stock average edged down 0.1 percent to a one-month closing low
in its longest losing streak this year, with Toyota Motor Co
<7203.T> and other exporters sold as worries about the U.S.
economy hit blue-chip performers.
The Nikkei <> shed 19.64 points to 13,829.92, its
lowest close since May 28. The broader Topix <> lost 0.2
percent to 1,346.08.
Data from the U.S. did nothing to dispel worries over the
state of the world's largest economy.
Durable goods orders were flat last month, despite
expectations for a slight rise, while sales of new single
family homes fell.
Bonds would normally benefit from signs of economic
weakness, but were hindered by the strength of stocks.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 16/32, with the yield at 4.1662 percent.
In currencies, the euro <EUR=> was unchanged at $1.5565
from a previous session close of $1.5565. Against the Japanese
yen, the dollar <JPY=> was up 0.41 percent at 108.28 from a
previous session close of 107.84.
(Additional reporting from bureaus across Europe, the U.S.
and Asia)
