* Markets await Fed meeting, data on U.S. and China
* Brent oil holds above $113 a barrel
* US consumer confidence data dents enthusiasm a little
* Euro climbs to 14-month high vs dollar
NEW YORK, Jan 29 World stock markets were mostly
higher on Tuesday and the dollar fell to a 14-month low against
the euro as the Federal Reserve began a two-day policy meeting
in which it is expected to maintain its easy monetary policy.
A report that showed U.S. single-family home prices rose in
November, building on a string of gains that point to a housing
market that is on the mend, added to investor
optimism on economic growth.
Financial markets reacted accordingly even as investors were
reluctant to make big bets, given mixed U.S. economic data, the
run-up in stocks in recent weeks and risk in the form of a slew
of economic reports for the rest of the week and the Fed
Financial markets were initially weaker on a report showing
U.S. consumer confidence dropped in January to its lowest in
more than a year. But that same data kept alive
expectations the Federal Reserve will maintain its ultra-easy
monetary policy for the foreseeable future.
"There is a serious split between the attitudes of consumers
and the attitudes of the markets," said Joseph Trevisani, chief
market strategist at WorldWideMarkets, in Woodcliff Lake, New
Jersey, after the consumer confidence data. "This may make for a
weaker dollar as it makes it less likely the Fed will
contemplate an early removal of QE," referring to the central
bank's debt-buying program.
The euro extended gains versus the dollar, breaking above
key resistance to hit a 14-month high. It last traded at
The Dow Jones industrial average was up 69.32 points,
or 0.50 percent, at 13,951.25. The Standard & Poor's 500 Index
was up 6.80 points, or 0.45 percent, at 1,506.98. The
Nasdaq Composite Index was down 1.84 points, or 0.06
percent, at 3,152.46.
"A move like this in one month is extraordinary, and keeping
the gains going will depend on concrete news like earnings and
data that show the economy is getting better," said Peter Tuz,
president of Chase Investment Counsel in Charlottesville,
Virginia. "We haven't seen enough of that to make people jump in
after the rally we've had."
Recent gains in stocks have largely come on a strong start
to the corporate earnings season, and that trend continued on
Tuesday with positive results from both Ford Motor Co and
European stocks scaled fresh two-year highs on Tuesday,
boosted by miners, as optimism about economic recovery gained
momentum following the encouraging U.S. home price data and
comments on growth in top metals consumer China.
The benchmark FTSEurofirst 300 index was up 0.4
percent. The index is up 24 percent from its June lows.
Gains across Asian markets, led by a big rally in Australian
shares, helped to lift MSCI's world equity index
0.6 percent to a 20-month high.
Peter Sullivan, head of European Equity Strategy at HSBC in
London, said the past 9 weeks have seen steady equity inflows
from retail investors after four years dominated by outflows.
He said these new equity flows were going primarily into
emerging markets and Europe but did not yet represent a full
switch from bonds to equities. "Bond flows remain positive, they
are just at a reduced level," he said.
Investors in Europe are looking to Spanish GDP data and
Italian and German debt auctions on Wednesday, and the first big
day of European earnings on Thursday to confirm the improving
outlook for region. Official data on China's giant manufacturing
and services sectors due on Friday will also be important,
especially for commodities markets.
In the U.S. Treasury debt market, benchmark 10-year yields
proved unable to hold above the key 2 percent level touched on
Monday, with investors looking ahead to a debt auction later in
the day, as well as the Fed meeting.
The benchmark 10-year U.S. Treasury note was
down 7/32, the yield at 1.9901 percent.
Debt prices had earlier reversed losses to advance in a
volatile session after the consumer confidence data.
"This is a reflection of the increase of the payroll tax
with the tax holiday going away," said Craig Dismuke, chief
economic strategist with Vining Sparks in Memphis, Tennessee.
"This is a big concern. This could cut 0.5 percentage point
off first-quarter GDP," he added.
Investors now await the outcome of the Federal Reserve
meeting on Wednesday. The Fed is not expected to change its
stance after deciding only in December to loosen conditions
further. However, investors are watching to see if changes in
the membership of the policy-setting committee for 2013 could
signal a shift in the future.
Gold snapped a four-day losing streak to rise 0.4 percent to
around $1,661.14 an ounce, but any hint that the Fed is
considering an end to its loose monetary policy would probably
send the precious metal down.
The first estimate of U.S. fourth-quarter gross domestic
product is also slated for release on Wednesday, followed by the
widely watched non-farm payrolls report on Friday.
Brent crude and U.S. oil prices rose on the U.S. housing
data. Brent crude climbed 53 cents to $114.01 a barrel
and U.S. crude rose 86 cents to $97.30 per barrel.