* Stocks in U.S., Europe recover on hopes Cyprus deal will
* Cypriot leaders reject bailout plan, look for alternative
* Euro up 0.2 pct at $1.2910, off 4-month lows
* Fed meeting outcome also in focus, few major changes seen
By Ryan Vlastelica
NEW YORK, March 20 Stock markets around the
world rose and the euro held firm on Wednesday on hopes that
European policymakers would contain the financial crisis in
Cyprus after lawmakers there voted down a rescue plan.
Investors also turned their attention to the outcome of the
U.S. Federal Reserve's policy meeting that ends later on
Wednesday, though few major changes in policy are expected.
Efforts to rescue Cyprus were thrown into disarray on
Tuesday when its lawmakers rejected the conditions for a 10
billion euro European Union bailout, but markets have calmed as
investors expect an alternative solution to emerge.
"Concerns have faded, and it doesn't seem like we'll see
much headline risk from Cyprus as the European Central Bank
continues to work towards a solution," said Mark Martiak, senior
wealth strategist at Premier/First Allied Securities in New
U.S. and European stocks ended three days of losses, with
Europe's broad FTSEurofirst 300 index up 0.5 percent,
while MSCI's world equity index rose 0.5
percent. The euro bounced off four-month lows to $1.2961
and the U.S. dollar index dipped 0.4 percent.
The Dow Jones industrial average was up 75.94 points,
or 0.53 percent, at 14,531.76. The Standard & Poor's 500 Index
was up 8.70 points, or 0.56 percent, at 1,557.04. The
Nasdaq Composite Index was up 19.60 points, or 0.61
percent, at 3,248.70.
In Asia, Hong Kong stocks bounced off a three-month low
thanks to a rally in Chinese shares, but the 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.
Investors were looking ahead to a statement from the Federal
Reserve's policy committee and a news conference by Chairman Ben
Bernanke later in the day.
Markets expect the Fed to maintain its $85 billion monthly
bond-buying stimulus effort despite recent improvements in U.S.
economic data but will be closely monitoring Bernanke's comments
for signals on how long the policy will continue.
"The Fed has made it clear its bond-buying program will
continue at least through mid-2015, so risk assets will continue
to be embraced, but if the Fed indicates it will start buying a
reduced amount, that may be something that could lead to a
pullback," Martiak said.
Concerns about Cyprus have not gone away though and 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
Still, German government bonds ticked lower, with the Bund
future down 0.3 percent at 144.13. In the U.S. bond
market, the benchmark 10-year Treasury note was down
12/32, with the yield at 1.9459 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 though if there was no
bailout the bank would have to end emergency lending assistance
under its current rules.
Meanwhile, 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 any loan deal at a first round of talks.
UK BUDGET EYED, OIL RISES
The main UK share index saw a modest 0.1 percent
rise. British finance minister George Osborne turned to 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 0.8 percent to $108.25, while U.S. crude futures
added 0.7 percent to $92.75.
"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."