GLOBAL MARKETS-Stocks up on expectations of steady Fed stimulus

Tue Jun 4, 2013 11:08am EDT

* Dollar recovers from one-month lows vs yen
    * European shares rebound after recent drops, Wall Street
higher
    * Japanese strategy eyed for gauge on commitment to stimulus


    NEW YORK, June 4 (Reuters) - Stocks around the world edged
higher on Tuesday amid expectations the Federal Reserve will
maintain its stimulus program to bolster the nascent U.S.
economic recovery while the dollar climbed against major
currencies.
    Markets were generally more settled than in recent sessions
and as a minor lull in the week's busy schedule of central bank
meetings and U.S. data offered a break from recent sharp moves.
    But many investors were holding off making big bets until
Friday's U.S. non-farm payrolls report shows the employment
situation, the key factor for the Fed's decision on monetary
policy. On Wednesday, the market will get an anecdotal look at
economic conditions from the Fed's Beige Book.
    "We are seeing the continuation of yesterday's relief rally
after the big sell-off last week. We are still in relief buying
mode but volatility has ticked up significantly here," said Ryan
Detrick, senior analyst at Schaeffer's Investment Research in
Cincinnati, Ohio.
    A report released on Monday showed the Institute for Supply
Management's index of U.S. factory activity fell to its lowest
since June 2009 and tempered expectations the
Fed would retrace its stimulus measures. This left investors to
focus more on Friday's U.S. jobs report than any other data this
week.     
    The Dow Jones industrial average was down 16.32
points, or 0.11 percent, at 15,237.71. The Standard & Poor's 500
Index was down 0.94 points, or 0.06 percent, at 1,639.48.
The Nasdaq Composite Index was up 1.87 points, or 0.05
percent, at 3,467.24. 
    But some analysts pointed to technical factors to say the
market, with the S&P 500 up more than 15 percent so far this
year, is not as strong as it looks.
    "It seems like the market just wants to go higher and
higher, but one thing that worries me is the advance-decline
numbers, which hit the worst in four years yesterday," said
Frank Gretz, market analyst and technician for brokerage
Wellington Shields & Co. in New York.
    The ratio of advancing stocks to declining stocks is used to
gauge the strength of the index price trend and the chance it
will reverse.
    European stocks were off the highs of the day but
remained 0.2 percent higher and on course to snap a two-day
losing streak that had left them at their lowest level since
early May. 
    MSCI's world share index, which tracks
stocks in 45 countries, was up 0.35 percent.
    
    ECB MEETING
    With investors also keeping positions tight ahead of the
European Central Bank and Bank of England monthly meetings on
Thursday, German Bund futures dipped and peripheral
euro zone debt edged up.
    A 10-month rally in euro zone debt has waned in recent weeks
as talk of a cut in Fed stimulus has pushed up yields. 
    The benchmark 10-year U.S. Treasury note was
down 5/32, with the yield at 2.1444 percent. 
    Commodity markets were also steadier. Copper climbed
for a second session, while gold and Brent crude 
were both slightly softer .
    After the volatility of recent days caused by an escalation
of political tensions, Turkish shares and the lira
 regained ground. That meant that most of the bigger
moves of the day were once again on Asian stock markets. 
    Japan's Nikkei rose 2 percent, its biggest one-day
rise in three weeks as currency swings amplified moves ahead of
Wednesday's announcement from Prime Minister Shinzo Abe on the
third leg of his "Abenomics" stimulus strategy.
    The Nikkei was at a 5-1/2-year peak and up more than 50
percent on the year until two weeks ago but has since lost 15
percent as doubts about the $1.4 trillion stimulus drive have
crept in.
    Abe's latest changes are likely to center on economic
reforms but sources told Reuters the government could also
include steps urging Japan's public pension funds to boost their
investment in equities and overseas. 
    "We are right at the start of a multi-year process
probably," said Grant Lewis, a Daiwa Securities economist in
London.
    The dollar gained 0.7 percent against the yen. 
    
    AUSTRALIA HOLDS, ECB TO FOLLOW
    Australian shares rose 0.3 percent and the Aussie
dollar dropped 1.3 percent after the country's central
bank left interest rates unchanged, as expected, but said there
was some scope for further easing. 
    The firmer U.S dollar also pushed the kiwi dollar lower.
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