* Stocks rise in anticipation of Fed's policy meeting
* Dollar firmer before Fed meeting, tone stays defensive
* Oil rises above $81 as earlier weak dollar supports
* Bonds ease ahead of planned $74 bln auction this week
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 9 (Reuters) - Global stocks rose and the
dollar edged higher on Monday on growing expectations the
U.S.Federal Reserve will signal this week it is ready to renew
its stimulus efforts to prop up a weakening U.S. economy.
Disappointing U.S. jobs data on Friday fanned speculation
the Fed may soon buy U.S. debt to support an economy that is
showing signs of slipping back into recession and to fight
potential deflation.
The dollar rose against major currencies as investors
squared up positions before the Fed's policy-setting committee
meets on Tuesday. []
Trading was limited as investors refrained from chasing
prices aggressively, with many already pricing in some form of
modest easing. Total U.S. stock volume was 5.76 billion
shares, the quietest session so far this year.
"We're expecting the Fed to officially lay the groundwork
for a policy change predicated on another month of economic
data," said Quincy Krosby, market strategist at Prudential
Financial in Newark, New Jersey.
"If they actually come out and say they're going to start
a new plan tomorrow, it might actually spook the market into
believing that things are much worse than we thought."
The U.S. central bank may resume the purchase of debt in a
bid to lower rates and encourage borrowing. It could also halt
interest payments on banks' excess reserves to spur lending.
MSCI's all-country world index <.MIWD00000PUS> and its
emerging markets index <.MSCIEF> both rose about 5 percent.
The Dow Jones industrial average <> gained 45.19
points, or 0.42 percent, to close at 10,698.75. The Standard &
Poor's 500 Index <.SPX> advanced 6.15 points, or 0.55 percent,
to finish at 1,127.79. The Nasdaq Composite Index <> rose
17.22 points, or 0.75 percent, to close at 2,305.69.
The Dow was weighed down by Hewlett-Packard Co <HPQ.N>,
whose shares fell 8 percent to $42.60. The company said on
Friday its chief executive quit after an investigation found
he falsified expense reports to conceal a "close personal
relationship" with a female contractor.
ALL EYES AND EARS ON THE FED
"Today's trade is all about anticipation of tomorrow. The
main question is, 'Will the Fed throw another quantitative
easing bombshell?' And according to that, people are either
buying or waiting on the sidelines," said John Canally, an
economist at LPL Financial in Boston.
Against a basket of major currencies as measured by the
U.S. Dollar Index <.DXY>, the dollar rose 0.39 percent to
80.720.
The euro <EUR=> was down 0.36 percent at $1.3234, and
against the Japanese yen, the dollar <JPY=> was up 0.42
percent at 85.85.
Stocks also rose in Europe and Asia as investors bought
riskier assets on expectations the Fed may inject extra
stimulus to maintain a recovery, helping lift sentiment.
[]
BONDS AND GOLD DIP, OIL CLIMBS
U.S. government debt prices slipped as investors cleared
space for this week's $74 billion longer-dated supply and
booked profits on recent gains fueled by fears over a
double-dip recession. []
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 2/32 in price to yield 2.83 percent.
Oil rose for the first time in four sessions, edging back
above $81 a barrel on Fed expectations.
U.S. crude for September <CLc1> delivery rose 78 cents, or
0.97 percent, to settle at $81.48 a barrel. Front-month ICE
Brent crude <LCOc1> rose 83 cents to settle at $80.99 a
barrel.
Gold futures ended lower, snapping an eight-session
winning streak, as a stronger dollar prompted investors to
lock in profits ahead of a closely watched policy statement by
the U.S. Federal Reserve. []
U.S. gold futures for December delivery dropped $2.70 to
settle at $1,202.60, the contract's first decline since July
27.
The MSCI index of Asia Pacific ex-Japan equities rose 0.8
percent <.MIAPJ0000PUS> to its highest since May 4. Japan's
Nikkei share average <> fell 0.7 percent, however, due to
the negative impact of a stronger yen on exporters.
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog click on http://blogs.reuters.com/hedgehub)
(Reporting by Angela Moon, Wanfeng Zhou and Chris Reese in
New York; David Sheppard and Atul Prakash in London; writing
by Herbert Lash; Editing by Jan Paschal)
