NEW YORK: World stocks surged to a three year high on Tuesday and the US dollar eased against the euro as investors bet the US Federal Reserve will keep its easy monetary policy in place at its meeting this week.
US government debt prices rose before the auction of $35 billion in two-year notes later in the session and ahead of a highly anticipated news conference by Fed Chairman Ben Bernanke on Wednesday.
Investors are focused on the US central bank's first scheduled briefing with reporters in its 97-year history, which will cap the end of a two-day meeting of the policy-setting Federal Open Market Committee.
US Treasuries gained support on expectations the Federal Reserve will leave interest rates near zero, fostering a friendly climate to own bonds at least in the near term.
"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. MSCI's all-country world index rose about 0.6 percent, standing at a new 2011 peak and close to a three-year high.
The InterContinental Exchange's US dollar index, a basket of major currencies, was down 0.19 percent at 73.845, while the euro was up 0.34 percent at $1.4628.
Wall Street rallied after solid earnings from Ford Motor Co, 3M Co and United Parcel Service, and on a survey of consumer confidence that topped analysts' forecasts and showed inflation expectations eased somewhat in April.
Both the benchmark Standard & Poor's 500 index and the iconic Dow Jones industrial average set new intra-day highs for 2011, climbing to near three-year peaks. The S&P 500 is up about 7 percent for the year.
US corporate earnings have been generally strong so far this season, with around three-quarters of S&P 500 index companies beating analysts' forecasts, helping lift the Dow industrials up to near three-year highs.
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 Jones industrial average was up 80.34 points, or 0.64 percent, at 12,560.22. The Standard & Poor's 500 Index was up 9.81 points, or 0.73 percent, at 1,345.06. The Nasdaq Composite Index was up 20.60 points, or 0.73 percent, at 2,846.48.
The Fed is expected to say it will complete a $600 billion bond-buying program known as quantitative easing that 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 benchmark 10-year US Treasury note was up 4/32 in price to yield 3.35 percent.
Crude oil rebounded slightly, while silver and gold tumbled after pushing to new highs in the case of gold early Monday.
North Sea Brent crude futures were up 32 cents at $123.98 a barrel.
US crude futures slid 19 cents at $112.09 a barrel.
Silver was set for its largest one-day fall in six weeks after having hit fresh 31-year highs, while gold came under pressure from investor uncertainty over the likely course of US monetary policy.
Spot silver ceded nearly 5.0 percent to $44.61 an ounce at one point, after surging on Monday to within 17 cents of the record $49.48 hit in January 1980.
Gold hit a record high of $1,518.10 a troy ounce on Monday but slipped to just below $1,500.
"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 US Fed, but there are worries about them ending (quantitative easing) ahead of time," Fertig said.
European stocks also rose, gaining ground for the fourth consecutive session, after UBS's results sparked a rally in the financial sector.
The FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,144.71 points.
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