World stocks slipped from a 2012 high hit earlier in the session while the dollar fell to a four-week low on Tuesday after the Federal Reserve signalled it would keep monetary policy ultra-loose to support growth in the world’s biggest economy.

MSCI’s main global stock index was up 0.36% at 337.15, having earlier hit 338.28, its highest since August last year.

European shares turned negative after tracking Wall St and Asia higher, with the pan-European FTSEurofirst 300 index of top shares down 0.2% at 1,086.89 points.

The sub-index of banking stocks outperformed, rising 0.79%, with Royal Bank of Scotland leading gains on reports that Britain could sell as much as a third of its stake in the bailed-out bank to Abu Dhabi.

The S&P 500 had rebounded from last week’s drop to retake a four-year high on Monday, while Japan’s Nikkei jumped 2.4% on Tuesday to hit its highest level since the massive earthquake and tsunami on March 11 last year.

The dollar fell to its lowest in four weeks against a basket of major currencies and analysts said it could slip more if speculation about further Fed monetary easing persists, while fresh data pointing to a U.S. recovery would be supportive. While he did not hint at a third round of bond purchases, Bernanke made clear the U.S. central bank is in no rush to reverse course after responding aggressively to a deep recession.

Italy sold 2.8 billion euros of two-year zero coupon bonds, with yields falling to their lowest since November 2010, and 1 billion euros of the inflation-linked bond.

Spain comfortably sold 2.58 bln euros in treasury bills on Tuesday.

Oil held above $125 a barrel, boosted by supply concerns as the West tightens sanctions on Iran although expectations for an increase in U.S. crude inventories dampened sentiment.

Expectations that U.S. rates will stay low and euro gains also pushed gold to two-week highs above $1,690 an ounce after prices posted their biggest one-day rise since late January in the previous session.

Source URL: http://business.financialpost.com/2012/03/27/fed-drives-world-stocks-to-2012-high/
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