* U.S., European stocks recover on hopes Cyprus deal will
* Cypriot leaders reject bailout plan, look for alternative
* Euro up 0.2 percent at $1.2910, off four-month lows
* Fed holds to policy of economic support, as expected
By Ryan Vlastelica
NEW YORK, March 20 Stock markets around the
world closed higher on Wednesday as the Federal Reserve held
firm to its plan to stimulate the U.S. economy, while the euro
steadied on hopes European policymakers would contain the
financial crisis in Cyprus.
The U.S. central bank held to its policy of large-scale bond
purchases to boost economic growth despite data indicating
improved conditions, though it suggested that the size and pace
of the purchases may change based on their expected efficacy and
"This is exactly what we want to hear right now. We should
continue to move higher, and gains could accelerate moving
forward," said Todd Schoenberger, managing partner at LandColt
Capital in New York, who called the statement "fabulous news for
The Dow Jones industrial average rose 55.91 points,
or 0.39 percent, at 14,511.73. The Standard & Poor's 500 Index
was up 10.37 points, or 0.67 percent, at 1,558.71. The
Nasdaq Composite Index was up 25.09 points, or 0.78
percent, at 3,254.19.
Efforts to rescue Cyprus were thrown into disarray on
Tuesday when its lawmakers rejected the conditions for a 10
billion euro European Union bailout.
While investors are worried about the impact of a Cypriot
collapse could have on the rest of the euro zone, the
conditions, which included taxing bank depositors, were also
viewed skeptically. Still, markets calmed as investors expected
an alternate solution to emerge.
European shares snapped a three-day losing streak, with the
FTSEurofirst 300 index closing 0.3 percent higher while
MSCI's world equity index rose 0.4 percent. The
euro bounced off four-month lows to $1.2933 and the U.S.
dollar index dipped 0.2 percent.
In Asia, Hong Kong stocks bounced off a three-month low
thanks to a rally in Chinese shares, but MSCI's broadest index
of Asia-Pacific shares outside Japan slipped 0.1
percent as other regional markets worried about Cyprus. Japanese
markets were closed for a holiday.
Concerns about Cyprus were clearly evident at an auction of
German government bonds, seen as a European safe haven. The sale
of 3.36 billion euros in new 10-year securities drew strong
demand and sold at an average yield of 1.36 percent, the lowest
auction price since July last year.
Still, German government bonds ticked lower, with the Bund
future down 0.3 percent at 144.16. In the U.S. bond
market, the benchmark 10-year Treasury note was down
15/32, the yield at 1.9564 percent.
Bond investors were looking to comments by the European
Central Bank, which has said it will provide liquidity to
Cypriot banks within certain limits. Even if there was no
bailout, the bank would have to end emergency lending assistance
under its current rules.
Cypriot leaders were holding crisis talks in Nicosia on
Wednesday to try to avert a financial meltdown after Tuesday's
overwhelming rejection of the terms of the European Union
bailout, which involved a levy on bank deposits.
The country was trying to get help from Russia, given the
high level of Russian deposits in Cypriot banks, but failed to
agree on a loan deal in a first round of talks.
UK BUDGET EYED, OIL RISES
The main UK share index dipped a modest 0.2 percent.
British finance minister George Osborne called on the Bank of
England to do more to help spur the country's stagnant economy
as he announced a halving of this year's growth forecast in an
annual budget statement.
Oil prices joined in the general recovery, with Brent crude
rising 1.1 percent to $108.59 per barrel, while U.S.
crude futures added 0.9 percent to $92.96.
"Clearly, market players anticipate that an alternative
solution will be found for Cyprus," said Carsten Fritsch,
analyst at Commerzbank. "Nonetheless, the uncertainty
surrounding this issue is likely to continue to keep oil prices
in check in the short run."