World stocks rise ahead of Fed meeting

World stocks mostly rose today as investors put aside worries over Europe's debt crisis to await the outcome of a two-day Federal Reserve meeting which many hope will announce measures to boost US growth.

Oil prices rose above $86 a barrel, while the dollar strengthened against the yen but slipped against the euro.

European shares were higher in early trade. Britain's FTSE 100 rose 0.5% to 5,287.68, Germany's DAX jumped 1.3% to 5,488.83 and the CAC-40 in Paris gained 0.7% to 2,961.74.

Wall Street was set to open higher too, with Dow Jones futures up 0.2% to 11,345. S&P 500 futures rose 0.1% to 1,199.40.

Japan's Nikkei 225 index fell 1.6% to close at 8,721.24 as export shares sagged amid a persistently strong yen that weighs on company profits. Australia's S&P/ASX 200 dropped 1% to 4,040.20. Benchmarks in Indonesia and the Philippines also fell.

But Hong Kong's Hang Seng rose 0.5% to 19,014.80 and South Korea's Kospi was 0.9% higher at 1,837.97. Mainland China's Shanghai Composite Index rose 0.4% to 2,447.76 while the smaller Shenzhen Composite Index was 0.4% higher at 1,071.60.

Indexes in India, Singapore and Thailand also gained.

Investors are reluctant to engage in big moves as talks dragged on between international lending officials and Greece, which will default on its towering national debt if it does not receive the next instalment of an international loan.

"Today you don't have the panic-selling you had yesterday, but still there is no buying. So we are in for a long bear market. I don't think the market is ready to rebound yet," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.

Meanwhile, Standard & Poor's downgrade of Italy's credit rating yesterday added to "the pain and fear" across European markets, Credit Agricole CIB said in a research note.

Italy's rating was cut by one notch due to weakening economic growth prospects and higher-than-expected levels of government debt, S&P said.

"Risk aversion remains highly elevated, with little prospect of a drop any time soon as Italy's downgrade adds to Europe's woes," Credit Agricole said.

In Tokyo trade, Honda dropped 3.1% and electronics giant Sony fell 4.1%. Fujitsu, which provides technology services for mobile devices and servers, tumbled 4.2%.

Japanese Finance Minister Jun Azumi told reporters today that the recent sharp rise of the yen has slowed the pace of the country's economic recovery from the March earthquake and tsunami.

Tokyo has not ruled out intervening in the currency market to stem the yen's rise against the US dollar and other major currencies.

Investors are looking to the US Federal Reserve meeting for positive news. Many economists expect the Fed, which starts a two-day policy meeting later today, to announce something to jolt the sputtering US economy.

Last month, the Fed took the unprecedented step of promising short-term interest rates near zero through mid-2013.

Some economists expect the Fed to eventually try for the third time to stimulate growth through a programme to buy Treasurys to lower long-term interest rates - a step known as "quantitative easing".

But hopes of Fed action did not mollify intensifying worries over Greece. Investors fear that it will not get the money it needs to avoid a default.

The Dow Jones industrial average closed down 0.9% at 11,401.01 yesterday. The drop ended five days of gains for stocks and marked the return of the back-and-forth trading that has accompanied the uncertainty about Europe's debt crisis.

The Nasdaq composite fell 0.4% to 2,612.83. The Standard & Poor's 500 index fell 1% to 1,204.09.

Benchmark oil for October delivery was up 92 cents at $86.62 in electronic trading on the New York Mercantile Exchange. Crude dropped $2.26 to settle at 85.70 dollars yesterday.

In London, Brent crude for November delivery was up 66 cents at $109.80 on the ICE Futures exchange.

In currencies, the dollar rose to 76.58 yen from 76.50 yen in late trading in New York yesterday. The euro rose to $1.3680 from $1.3671.