* Dow, S&P 500 set new 2011 highs as global stocks surge
* Bond prices gain before 2-year note auction, Fed meeting
* Gold, silver retreat from record highs, oil treads water
* Euro vaults to 16-month high; Fed statement awaited
(Adds fresh prices)
By Herbert Lash
NEW YORK, April 26 (Reuters) - World stocks surged toward
three-year highs on Tuesday and the U.S. dollar eased against
the euro as investors bet the U.S. Federal Reserve will keep
its easy monetary policy in place at its meeting this week.
Stocks rallied, with Standard & Poor's 500 Index and the
Dow Jones industrial average setting new highs for 2011, helped
by solid earnings at Ford Motor Co <F.N>, 3M Co <MMM.N> and
United Parcel Service <UPS.N>. For more see
[].
The euro advanced to a 16-month high against the dollar
with little in the way of its advance as long as the Fed still
lags other major central banks in raising interest rates.
[]
Investors and traders anticipate no surprises from Fed
Chairman Ben Bernanke's news conference at 2:15 p.m. (1815 GMT)
on Wednesday after the U.S. central bank releases its latest
policy statement and economic forecasts at 12:30 p.m. (1630
GMT).
The briefing with reporters, at the end of a two-day
meeting of the policy-setting Federal Open Market Committee,
will be the first in the Fed's 97-year history.
Markets were buoyed by a view that, even as the Fed nears
the end of its second phase of bond buying -- a program known
as quantitative easing, or QE2 -- it will hold on to its
portfolio and its current level of monetary accommodation for
some time.
"There will probably not be a QE3, but they will probably
not withdraw QE2 either. They are going to leave their balance
sheet at this level for some time," said Constance Hunter,
chief economist of Aladdin Capital Holdings in Stamford,
Connecticut.
MSCI's all-country world stock index <.MIWD00000PUS> rose
as much as 0.67 percent, climbing to a fresh 2011 peak of
352.40 -- a level last seen in July 2008.
U.S. Treasury prices rose on expectations the Fed will keep
its near-zero interest rate policy even as it likely signals an
end its $600 billion bond program in June. []
Solid demand for $35 billion in new two-year debt also
buttressed the bond market, pushing yields to fresh one-month
lows. []
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
15/32 in price to yield 3.31 percent.
"Investors are unlikely to learn from Bernanke when the Fed
will tighten, as it is doubtful that he himself knows," said
Marc Chandler, global head of currency strategy at Brown
Brothers Harriman in New York.
The Fed is expected to say it will complete its $600
billion bond-buying program, which is scheduled to end in June.
[]
If the Fed were to surprise the market and turn more
hawkish, it would pose a risk to the sizable amount of dollar
shorts in the currency market, analysts said.
The InterContinental Exchange's U.S. dollar index <.DXY>,
which measures the dollar's performance against a basket of
major currencies, was down 0.25 percent at 73.802, while the
euro <EUR=> was up 0.40 percent at $1.4638.
Both the S&P 500 and the Dow Jones industrial average set
new intraday highs for 2011 while climbing to near three-year
peaks. The S&P 500 is up 7 percent for the year.
The Dow hit an intraday high at 12,613.16, while the S&P
500 reached an intraday high at 1,349.55.
Investors were cheered by a report that showed consumers
felt better about the short-term outlook. The Conference Board,
an industry group, said its index of consumer attitudes rose to
65.4 in April from a revised 63.8 in March. []
The Dow <> closed up 115.49 points, or 0.93 percent, at
12,595.37. The S&P <.SPX> ended up 11.99 points, or 0.90
percent, at 1,347.24. The Nasdaq Composite Index <>
finished up 21.66 points, or 0.77 percent, at 2,847.54.
North Sea Brent ended up in volatile trading, while U.S.
crude closed pennies lower as oil investors also watched for
any signal of a change in U.S. monetary policy after the FOMC
meeting.
Brent crude for June <LCOc1> gained 48 cents to settle at
$124.14 a barrel, having bounced off a $122.78 low.
U.S. crude <CLc1> for June settled 7 cents lower at
$112.21.
Silver posted its largest one-day fall in six weeks after
having hit fresh 31-year highs in the previous session, while
gold came under pressure from investor uncertainty over the
likely course of U.S. monetary policy. []
Spot silver <XAG=> fell as much as 4.9 percent to a session
low of $44.62 an ounce, after having risen on Monday to within
17 cents of the record $49.48 set in January 1980.
Spot gold <XAU=> hit a record high of $1,518.10 a troy
ounce on Monday but slipped to $1,502.85.
"The rally has been strong. It's not surprising to see
profit-taking ahead of the FOMC meeting," said Peter Fertig, a
consultant at Quantitative Commodity Research.
"Markets expect it will be a dovish statement from the U.S.
Fed, but there are worries about them ending (quantitative
easing) ahead of time," Fertig said.
European shares rose for the fourth straight session and
hit a two-week closing high, boosted by corporate results in
both the United States and Europe, including those of Swiss
bank UBS <UBSN.VX>. []
The FTSEurofirst 300 <> index of top European shares
rose 0.3 percent to end the day at 1,145.96 points, the highest
close since April 11.
(For Reuters Global Investing Blog, double-click on
http://blogs.reuters.com/globalinvesting; for MacroScope Blog,
double-click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog, double-click on http://blogs.reuters.com/hedgehub)
(Reporting by Julie Haviv, Edward Krudy and Ellen Freilich in
New York and Amanda Cooper, Brian Gorman and Ikuko Kurahone in
London; Writing by Herbert Lash; Editing by Jonathan Oatis)
