NEW YORK: World stocks rose on Tuesday, recouping the prior day's losses, but nagging debt worries on both sides of the Atlantic and new signals of inflation dangers in China curbed appetite for risk.
A weaker dollar propelled gold to a record peak above $1,500 an ounce and oil in New York above $108 a barrel. Silver reached $44 an ounce, a 31-year high.
Investors dipped their toes back into stocks and other risk assets in part on solid company results, a day after Standard & Poor's jolted markets when the debt rating agency warned that political gridlock in Washington is impeding work on paring the $14 trillion federal debt load.
"People took a deep breath and stepped back," said Mark Pawlak, market strategist at Keefe, Bruyette & Woods in New York. "It's not a hugely significant event (for the United States) because there are precedents for this S&P move with other AAA-rated sovereign credits. This helped stocks to stabilize."
However, a likely protracted US budget fight and speculation about a Greek debt restructuring should weigh on stocks, even if there were upbeat results from Apple and corporate heavyweights in the coming days, he said.
"Stocks are just chopping in a tight range," Pawlak said.
MSCI's all-country world stock index rose 0.6 percent, retracing some of Monday's 1.6 percent loss, which was the biggest one-day drop in a month.
Wall Street stocks closed up 0.5 percent in choppy trading. Better-than-expected results from investment bank Goldman Sachs and healthcare company Johnson & Johnson stoked bids for US shares after they fell more than 1 percent on Monday on sovereign debt worries.
Solid earnings from luxury goods makers LVMH and Burberry spurred a 0.4 percent rise in European stocks after a 2 percent drop on Monday.
Japan's Nikkei closed down nearly 1.3 percent after prior day's losses in the United States and Europe.
Investor unease persisted over a possible Greek debt restructuring that could further strain the euro zone.
Greece sold 1.6 billion euros of three-month debt but was forced to pay a yield of more than 4 percent, more than quadruple what Germany -- the euro zone's strongest member -- pays on similar obligations.
DOLLAR SLIPS
Standard & Poor's rattled investor confidence on Monday when it changed its outlook on the United States to negative from stable, threatening the future of the prized AAA credit rating for the world's top economy.
In currency trading on Tuesday, the US dollar slipped 0.6 percent against a basket of major currencies after making headway the previous day.
Monday's dollar gains came on a rush for safe havens despite the risk of S&P downgrading US debt in two years if Washington fails to achieve a budget plan that relies less on debt.
S&P's warning intensified scrutiny of the US budget deficit and the political fight to slash it. The deficit is a key element in the global imbalances that worry many investors and policymakers.
There was no direct reaction to the S&P move on Tuesday from Beijing, which holds vast reserves of US Treasuries. However, the head of China's central bank said the country should diversify investments as its some $3 trillion of foreign exchange holdings had grown too large.
Another Chinese rate setter said inflation pressures gave further scope for a rise in banks' reserve requirements following seven increases -- together with four raises in benchmark interest rates -- since October.
The euro recovered from the previous day's sell-off, helped by encouraging economic data.
The single currency rose 0.7 percent to $1.4336. Overall, it has pulled back sharply, having hovered at a 15-month high around $1.4520 for the past week.
Lingering worries over the cost to bail out peripheral countries exerted pressure on the European debt market, which lagged US Treasuries. Ten-year Greek bond yields were last up 17 basis points at a euro-era high of 14.815 percent, while German Bund futures fell 0.3 percent to 122.12.
The benchhmark US 10-year note's yield slipped 2 basis points to 3.36 percent, its lowest in three weeks.
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