* U.S. shares climb, Fed statement due Wednesday
* Dollar changes course, down against the euro
* Brent crude rises above $106 before trimming gains
By Leah Schnurr
NEW YORK, June 18 U.S. equities pushed higher on
Tuesday as investors grew more confident that the Federal
Reserve would temper its recent statements on the future
reduction of U.S. monetary support, while still pointing to
The dollar was down 0.2 percent against a basket of
currencies, while the euro rose 0.3 percent to $1.3406,
boosted by improved German investor sentiment.
The Federal Reserve meeting, which started Tuesday, has
taken on greater significance since Fed Chairman Ben Bernanke
said in May stimulus plans could be scaled back if the U.S.
economy gains momentum. The Fed will issue its policy statement
on Wednesday, followed by a news conference by Bernanke.
Last month's comments threw a wrench in the stock market's
rally, caused U.S. benchmark bond yields to rise and hurt the
dollar. The Fed is currently buying $85 billion in bonds monthly
to keep borrowing costs low and boost demand.
Wall Street was about 0.5 percent higher by midday, led by
growth shares that would be expected to do well in an expanding
economy. European shares ended flat. U.S. bond yields were
marginally higher, with the benchmark 10-year Treasury
trading at 2.20 percent, though that is lower than
earlier in June.
The expectation is that the Fed will dial back its rhetoric
on tapering to ease "hysteria" in the markets since talk of
reducing stimulus heated up in May, said Peter Kenny, chief
market strategist at Knight Capital in Jersey City, New Jersey.
"The volatility is absolutely 100 percent tied to the
confluence of themes, the two themes being quantitative easing
on the one hand, and improving economic data on the other hand,
which supports the removing of quantitative easing," said Kenny.
"The volatility is right where those two currents meet."
Data on Tuesday showed U.S. consumer prices rose in May and
a gauge of underlying price pressures showed signs of
stabilization after a long decline. That could be encouraging to
Fed policymakers who would like to see stronger inflation.
The Dow Jones industrial average was up 119.39
points, or 0.79 percent, at 15,299.24. The Standard & Poor's 500
Index was up 10.44 points, or 0.64 percent, at 1,649.48.
The Nasdaq Composite Index was up 26.28 points, or 0.76
percent, at 3,478.42.
The benchmark S&P 500 has surged 15 percent since the start
of 2013, but the rally in stocks is expected to decelerate in
the latter part of the year, putting equities only modestly
beyond their record highs, a Reuters poll found.
European shares provisionally ended down 0.1
percent. Stocks found some support in a rise in investor
sentiment in Germany that suggested Europe's largest economy is
on the slow road to recovery. But it was only a brief
distraction ahead of the Fed.
A measure of global stock markets was up 0.3
The dollar gained against the Japanese yen, gaining 0.7
percent to 95.18 yen.
HSBC strategist Daragh Maher expects Bernanke to emphasize
that any scaling back of Fed stimulus will depend on data.
"While this should be generally dollar bullish, if volatility
rises, it could see dollar/yen lose ground."
Treasuries were choppy, with bond investors focused on the
Fed. Benchmark 10-year Treasuries were last down 3/32 in price
to yield 2.1872 percent. Thirty-year bonds cut early
declines to add 1/32 in price to yield 3.35 percent.
The U.S. economic data helped boost Brent crude above $106 a
barrel as it eased some concerns over what the Fed may signal.
Brent later trimmed gains and was recently up 11 cents
to $105.58, while U.S. oil was up 24 cents at $98.01.
"If the Fed takes away the stimulus, it will boost the
dollar and potentially push oil prices down, but a lot has been
priced in already," said Simon Wardell, analyst at Global
"The Fed will try to do it as gradually as possible to avoid
a shock so the impact on oil will probably be minimal."