* MSCI world equity index up 1.24 pct
* Broadly weak dollar at 1-yr low vs euro before Fed, G20
* Near-record $112 bln sales keep government bonds at bay
(Updates with U.S. markets activity, changes byline, dateline;
previous LONDON)
By Jennifer Ablan
NEW YORK, Sept 22 (Reuters) - World stocks and oil rose on
Tuesday ahead of a two-day Federal Reserve meeting, while
investors' search for higher returns pushed the dollar to a
one-year low against the euro.
Major U.S. equity indices and European markets <>
followed Asian markets <.MIAPJ0000PUS> higher, while safe-haven
U.S. and German government bond prices <US10YT=RR> <FGBLc1> and
the low-yielding dollar <.DXY> all retreated.
The latest leg of the rally in risk assets, which helped
world stocks recoup more than half of last year's losses,
stemmed from repeated pronouncements by G20 policymakers to
keep emergency economic support in place.
The G20 summit of rich and emerging nations in Pittsburgh
on Thursday and Friday is expected to underline that commitment
while the Fed's monetary policy-setting Open Market Committee
is expected to do likewise when its meeting ends on Wednesday.
Money managers aren't fighting the rally. "The fundamental
position for all equity markets has just been improving and we
know that the central banks, particularly the UK and,
importantly, the Federal Reserve, are committed to keep
interest rates low for a long period of time," said Mike
Lenhoff, chief strategist at Brewin Dolphin in London.
The MSCI world equity index <.MIWD00000PUS> rose 1.24
percent, closing in on last week's year high of 292.06. The
index has risen 27 percent since January.
In afternoon trading, the Dow Jones industrial average
<> was up 47.91 points, or 0.49 percent, at 9,826.77, while
the Standard & Poor's 500 Index <.SPX> was up 7.87 points, or
0.74 percent, at 1,072.53. The benchmark 10-year U.S. Treasury
note was up 7/32, with the yield at 3.46 percent.
The FTSEurofirst 300 index rose 0.54 percent while emerging
stocks <.MSCIEF> rose 1.41 percent.
The U.S. dollar slid to a 1-year low against the euro near
$1.48 <EUR=>, while the New Zealand dollar <NZD=D4> -- often
seen as a bellwether of global risk appetite -- surged to a
13-month high above $0.7230. For more see [].
Energy stocks advanced as crude oil <CLc1> gained 1.86
percent to $71.59 a barrel, bouncing back after its 3 percent
decline on Monday.
The Fed -- the U.S. central bank -- is expected to keep its
benchmark federal funds rate unchanged in a range of zero to
0.25 percent, but investors will look for signs in its
accompanying statement of how quickly policy-makers might
remove extraordinary programs that have helped revive lending
and economic activity.
DOLLAR WARY OF G20
Although trading volumes in Asia were capped by public
holidays in Japan, G20 discussions on plans to rebalance the
world economy were read by traders as dollar-negative there
with sentiment spilling over in Europe and the United States.
A document outlining the U.S. position ahead of the summit
said exporters, which include China, Germany and Japan, should
consume more, while debtors like the United States ought to
boost savings. []
"If you take the view that too much of U.S. growth has been
domestically driven, the next logical step is to say an orderly
decline of the dollar -- it's not in anyone's interest to see a
collapse -- in many ways makes sense," said Tom Fitzpatrick,
chief technical analyst at Citigroup in New York.
"At the end of the day, the U.S. has a zero interest rate
policy and the highest fiscal deficit in peacetime while
(foreign investors) are holding a lot of dollars, so the path
of least resistance for the dollar is down," he added.
Government debt markets continue to be weighed down by a
fresh wave of new debt sales this week. Tuesday, the U.S.
government sold $43 billion worth of two-year Treasury notes in
an auction that attracted strong demand. []
The sale is the first of three that will bring a
near-record $112 billion in debt to market this week, all of
which are likely to be watched closely to gauge how investor
appetite is holding up in this year's deluge of bond supply.
(Additional reporting by Steven C. Johnson in New York and
Natsuko Waki and Atul Prakash in London; Editing by James
Dalgleish)
