September 17, 2013 / 6:18 PM / in 4 years

GLOBAL MARKETS-Dollar dips, stocks flat as Fed meets on stimulus

* MSCI world equity index ekes out gain as Wall St edges up
    * Dollar dips but remains above four-week low
    * U.S. oil futures drop below $110 on reduced Syrian

    By Herbert Lash
    NEW YORK, Sept 17 (Reuters) - The dollar retreated and
global equity markets were flat to modestly higher on Tuesday as
Federal Reserve policymakers took part in a two-day meeting that
is expected to result in the beginning of a rollback of the
Fed's stimulus program.
    Wall Street stocks rose, leading some other equity gauges to
eke out gains, after data on U.S. consumer prices added to
sentiment that Fed Chairman Ben Bernanke will lead the U.S.
central bank to begin to modestly trim back its bond buying at
the end of its two-day meeting on Wednesday.
    "The Fed is going to be very gradual in any tapering process
as the most aggressive estimates are $10 or $15 billion will
come out" of the current monthly purchases, said Art Hogan,
managing director at Lazard Capital Markets in New York.
    The avoidance of a strike against Syria and global economic
data that continues to improve also underpinned stock gains,
Hogan said.
    U.S. consumer prices barely rose in August. However, gains
in rents and medical care costs pointed to a stabilization in
underlying inflation. A 1.8 percent rise over the past 12 months
in core inflation, which strips out the volatile energy and food
components, could ease concerns about a disinflationary trend
and could allow the Fed to begin to scale back its $85 billion a
month in bond purchases. 
    The Labor Department said its Consumer Price Index edged up
0.1 percent last month after rising 0.2 percent in July.
Economists had expected consumer prices to rise 0.2 percent last
    The euro rallied against the dollar after a
better-than-expected reading of a German investor sentiment
survey, while European shares edged lower, pressured by weakness
in the auto sector following a decline in demand last month.
    The euro was last up 0.2 percent at $1.3359. The
dollar was down 0.19 percent versus a basket of six currencies
at 81.142 and was last up 0.12 percent against the yen,
at 99.17 yen.
    MSCI's all-country world equity index rose
0.07 percent, lifted by gains in U.S. stocks, in particular a
1.4 percent rise in shares of Apple Inc, to $456.46.
     The Dow Jones industrial average was up 46.85
points, or 0.30 percent, at 15,541.63. The Standard & Poor's 500
Index was up 7.03 points, or 0.41 percent, at 1,704.63.
The Nasdaq Composite Index was up 24.57 points, or 0.66
percent, at 3,742.42. 
    Europe's FTSEurofirst 300 index of leading European
shares fell 0.46 percent to close at 1,252.63.
    Brent crude fell below $109 a barrel as a deal averting any
imminent U.S. attack on Syria calmed fears of a disruption to
Middle East oil supplies and after output resumed at a large
oilfield in western Libya.
    Brent crude for delivery in November fell by $2.19 a
barrel to a near-one-month low of $107.88. U.S. crude for
October delivery was down $1.42 at $105.17 a barrel. 
    U.S. Treasury debt prices rose as investors awaited the
Fed's decision on stimulus and clues on how it might manage
short-term interest rates.
    A recent Reuters poll showed economists expect the Fed to
reduce its asset purchases by a relatively modest $10 billion a
    The Fed will release its policy statement at 2 p.m. (1800
GMT) on Wednesday, after the end of the meeting, followed by a
news conference by Bernanke at 2:30 p.m.  
    Longer-dated U.S. Treasuries prices erased gains as higher
Wall Street stock prices and weaker German Bunds reduced initial
bids for U.S. government debt.
    Benchmark 10-year Treasury notes were up 3/32
price to yield 2.8414 percent.
    The U.S. labor market remains fragile and job growth has
been running below the pace seen in prior economic recoveries,
which might lead Fed policy-makers to begin tapering by a modest
amount, analysts said. 
    "The jobs market continues to grow, but at a pace that is
less than ideal. Nonetheless, all indications are that the Fed
is poised to announce tomorrow that they will begin to pare back
their bond purchases," said Jim Baird, chief investment officer
at Plante Moran Financial Advisors in Kalamazoo, Michigan.
    Safe-haven Bunds fell after data showed the ZEW German
economic sentiment survey for September rose to 49.6 from 42.0
in August, significantly above the 46.0 consensus forecast.
    Bund futures settled down 43 ticks at 138.07, and
last was 45 ticks lower on the day at 138.05.

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