GLOBAL MARKETS-Wall St trades up as U.S. inflation data lift dollar, Treasury yields

Tue Jun 17, 2014 4:49pm EDT

* Wall St shares end up before Fed decisions
    * Treasuries' yields rise on US inflation pickup
    * Oil prices top $113 on fears of Iraq's impact on export

 (Adds New York market closings, updates prices)
    By Michael Connor
    NEW YORK, June 17 (Reuters) - The dollar edged up and U.S.
Treasuries prices fell on Tuesday as rising U.S. inflation drove
speculation that the Federal Reserve, which is meeting this
week, may raise interest rates sooner than global investors have
been expecting.
    Wall Street stocks rose modestly, as investors shrugged off
the turmoil in Iraq and kept an eye on the Fed as it began its
two-day policy meeting.
    The S&P 500 ended near its record high after three days of
gains. The inflation data helped bank shares, with the S&P
Financial index up just shy of 1 percent.
    The Dow Jones industrial average rose 27.48 points or
0.16 percent, to end at 16,808.49. The S&P 500 gained
4.21 points or 0.22 percent, to 1,941.99. The Nasdaq Composite
 added 16.13 points or 0.37 percent, at 4,337.23.    
    The U.S. Labor Department said its Consumer Price Index rose
0.4 percent last month. The gain was the largest since February
2013 and topped expectations for a 0.2 percent rise, following a
0.3 percent advance in April. 
    "It was a much stronger print than the market was expecting,
and many are thinking that may lead to a more hawkish tone
tomorrow," said Michael Pond, head of global inflation-linked
research at Barclays in New York.
    Fed officials are expected to trim their bond-buying program
further at the conclusion of their meeting on Wednesday,
although the Fed is not expected to raise interest rates until
mid-2015. 
    The U.S. dollar rose, with the dollar index up 0.17
percent. Against the Japanese yen, the dollar was ahead
0.29 percent at 102.13 yen.
    "If the Fed decides to be less dovish, that could give a bid
to the dollar," said currency strategist Sebastien Galy at
Societe Generale in New York.
    U.S. Treasuries' prices fell on the CPI data, which analysts
said may give the Fed more confidence in accelerating an end of
its ultra-low interest rate regime.
    Benchmark 10-year notes fell 15/32 in price to
yield 2.653 percent, up from 2.60 percent late on Monday.
Thirty-year bonds dropped 27/32 in price to yield
3.443 percent, up from 3.40 percent.
    Investors have been closely monitoring the situation in
Iraq, worried that it could lead to sharply higher oil prices 
for an extended period. ID:nL5N0OY2HT]
    "The Iraq situation could continue to destabilize markets,
and there are a lot of unknown factors that could keep oil
prices elevated. That said, valuations for stocks are not
alarmingly high, and there aren't many alternatives for
investors," said Bernard Baumohl, a managing director at the
Economic Outlook Group in Princeton, New Jersey.
    Stocks on world markets were mixed. An index of European
shares gained 0.3 percent, while the MSCI index of
world stock markets added 0.1 percent.
    Brent oil held steady above $113 per barrel, with Brent
crude for August delivery up 41 cents to $113.36 per
barrel. U.S. light crude was off 72 cents at $106.18.
    U.S. gold futures' most-active contract slipped
$4.80 to $1,270.40 an ounce.

 (Reporting by Michael Connor in New York; Editing by Leslie
Adler and Dan Grebler)
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