(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, April 28 (Reuters) - Oil hit a record near $120 a
barrel and U.S. stocks edged higher on Monday, boosted by
energy stocks and optimism over a proposed $23 billion takeover
of chewing gum icon Wm Wrigley Jr Co <WWY.N>.
A recent rally in the dollar stalled as investors bought
euros to square up positions ahead of a key U.S. interest rate
decision later this week when Federal Reserve policy-makers
meet.
Oil prices retreated from early peaks as the dollar slipped
against the euro, reflecting rising but still minor speculation
that the Fed may not cut interest rates this week.
Another Fed rate cut would further erode an already weak
dollar and likely fuel higher prices, especially of
dollar-denominated commodities. But if the Fed holds the line
on further rate cuts that could cause oil prices to drop.
The two-day meeting starting on Tuesday of the Federal
Reserve Open Market Committee has taken on greater importance
because the decision is not as clear-cut as the recent past.
"The market is holding its breath ahead of the Fed
tomorrow," said Matthew Strauss, senior currency strategist, at
RBC Capital Markets in Toronto. "For the first time in a number
of FOMC meetings, there is significant uncertainty about the
decision and the statement."
The uncertainty over the Fed's move tempered the mood on
Wall Street. But the proposed $23 billion acquisition of
Wrigley by M&M's candy maker Mars Inc and billionaire investor
Warren Buffett and an investor's bid to increase a stake in
Ford Motor Co <F.N> showed investors were still willing to put
money in areas that held promise.
Shortly after midday, the Dow Jones industrial average
<> was up 26.14 points, or 0.20 percent, at 12,918.00. The
Standard & Poor's 500 Index <.SPX> was up 2.91 points, or 0.21
percent, at 1,400.75. The Nasdaq Composite Index <> was up
7.08 points, or 0.29 percent, at 2,430.01.
Wrigley's shares surged 23.2 percent to $76.95.
Ford shares shot up nearly 11 percent to $8.32 after Kirk
Kerkorian's Tracinda Corp said it intends to make a cash tender
offer for up to 20 million shares of the automaker's common
stock at a price of $8.50 per share.
A bleak assessment of the economic outlook, however by
Buffett injected a note of caution. Buffett told CNBC
television that the United States could be mired in a longer
and deeper recession than most people think.
Weighing heavily on the financial sector was a report from
Morgan Stanley cutting its profit forecasts on several U.S.
banks, including Bank of America Corp <BAC.N>, whose stock
declined 0.5 percent to $38.10.
European shares advanced, led by banks such as Swiss bank
UBS <UBSN.VX> on hopes that asset write-downs are over and
miners such as Xstrata <XTA.L> thanks to higher metals prices.
The FTSEurofirst 300 <> index of top European shares
ended 0.6 percent higher at 1,338.60 points -- its highest
close since Feb. 27 and fourth consecutive gain.
With UBS up 3.2 percent and rival Swiss bank Credit Suisse
<CSGN.VX> 2.7 percent higher, the DJ Stoxx bank index <.SX7P>
was the day's top sectoral performer with a gain of 1.1
percent, followed by insurance <.SXIP>, up 1.06 percent.
Among mining stocks, Xstrata rose 2.4 percent and
Antofagasta <ANTO.L> gained 2.6 percent, lifted by higher
copper prices <MCU3>.
The DJ Stoxx basic resources index, which includes miners
<.SXPP> rose by just over 1 percent.
Record crude oil prices have created another headwind for
equity markets, although energy shares benefited from a rise in
U.S. crude for June delivery to a record $119.93 a barrel.
Energy prices were higher, but off the day's peak of
$119.93. Prices are up almost 25 percent since the start of the
year.
U.S. light sweet crude oil <CLc1> rose 17 cents, or 0.14
percent, to $118.69 per barrel. London Brent crude <LCOc1> was
up 33 cents at $116.67.
The dollar fell against major trading-partner currencies,
with the U.S. Dollar Index <.DXY> down 0.13 percent at 72.633.
The euro <EUR=> was up 0.06 percent at $1.5632, and against the
yen, the dollar <JPY=> was unchanged at 104.40.
Gold rose nearly 1 percent as oil hit a record, but
investors remained cautious ahead of this week's Fed meeting.
Spot gold prices <XAU=> were up $7.85, or 0.89 percent, to
$893.00.
U.S. Treasury debt prices rose.
The benchmark 10-year U.S. Treasury note <US10YT=RR>
rose4/32 to yield 3.85 percent. The 2-year U.S. Treasury note
<US2YT=RR> gained 2/32 to yield at 2.38 percent. The 30-year
U.S. Treasury bond <US30YT=RR> rose 3/32 yield 4.59 percent.
Investors have pared bets that the Fed will aggressively
cut benchmark interest rates. Fed funds futures indicate an 82
percent implied chance of a quarter percentage-point cut in the
recommended overnight lending rate between banks when the Fed
concludes its meeting.
Over a week ago, a significant number of investors were
calling for the Fed to cut by half a point.
The indecision over what the Fed will do put a damper on
markets.
"They're waiting for the (Fed's decision) to come out,"
said Angel Mata, managing director of listed equity trading at
Stifel Nicolaus Capital Markets in Baltimore.
"There's no need to rush and buy stocks."
Worries over rising inflation, due in large part to soaring
energy costs, have some investors thinking the Fed may signal
on Wednesday that it could be done cutting rates for now.
In Asia, Japan's broader TOPIX index <> gained 1.6
percent or 21.84 points to 1,361.75. MSCI's index of stocks
across the rest of Asia <.MIAPJ0000PUS> rose 0.5 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Chris Reese in New York, Peter Starck in Frankfurt and Jane
Merriman and Atul Prakash in London; Editing by Leslie Adler)
