GLOBAL MARKETS-S&P 500 leads stocks ahead of Fed meeting; dollar jumps

Reuters

* Brent dips but holds above $109 on supply concerns

* S&P 500 hits record, buoys global stocks

* Dollar index rises the most in almost two months

By Rodrigo Campos

NEW YORK, Oct 29 (Reuters) - The S&P 500 hit a record onTuesday to lead global equities higher ahead of word from theFederal Reserve on the future of its stimulus program, while theU.S. dollar climbed the most in almost two months against abasket of currencies.

Wall Street stocks advanced on continued expectations theFed, at the end of its meeting on Wednesday, will keep its $85billion monthly bond purchases intact for several months.

Markets were thrown for a loop in mid-September, when theexpectation was high for the Fed to start trimming its monthlypurchases. Although many are wary of surprises when the Fedpublishes a statement after its two-day meeting concludes, mostsee the recent rally in riskier assets and a dollar selloff aslargely factoring in the decision.

"The Fed surprised me by not tapering in September and thekey reason they cited was the fact inflation is running verymoderately, and they still have lots of room on the inflationfront," said Doug Foreman, co-chief investment officer at KayneAnderson Rudnick Investment Management in Los Angeles.

"Certainly the data today didn't give them anythingdifferent to think about that."

U.S. producer prices unexpectedly fell in September and theincrease in the annual rate was the smallest in nearly fouryears.

Shortly before the close of trading, the Dow Jonesindustrial average rose 100.43 points, or 0.65 percent,at 15,669.36. The Standard & Poor's 500 Index was up 7.86points, or 0.45 percent, at 1,769.97. The Nasdaq Composite Index was up 6.99 points, or 0.18 percent, at 3,947.11.

MSCI's world equity index edged up 0.1percent, trading within last week's range.

In Europe, shares edged higher as results at BP andSaipem fueled a surge in the oil sector, a laggard inthis year's equity rally. The FTSEurofirst 300 index closed up 0.4 percent.

DOLLAR RALLIES,

The U.S. dollar rose for a third straight session againstmajor counterparts as traders bought back the currency on a viewthat markets already priced in expectations the Federal Reservewill maintain its bond-buying program in coming months.

Traders also said the dollar's latest drop, which took it toa nine-month low against a basket of currencies on Friday, mayhave been overdone. But sentiment remains negative and investorswill likely see any rebound as a selling opportunity.

The dollar index rose 0.5 percent to 79.634 in itslargest percentage gain since early September, while the eurohit a one-week low against the greenback at $1.3735 but wasstill close to a two-year high hit last week.

U.S. Treasuries prices were flat, with yields close tothree-month lows. The light trading volume suggested traderswere reluctant to make big bets during the Fed meeting and asthe Treasury Department sought to sell $96 billion incoupon-bearing debt this week.

"The market is directionless. There is no urgency to pushyields higher or lower," said Lou Brien, market strategist atDRW Trading in Chicago.

Benchmark 10-year Treasury notes were up 2/32,the yield at 2.5034 percent.

Spot gold, which is up more than 7 percent from athree-month low hit mid-October, fell 0.5 percent to around$1,346 an ounce, pressured by the dollar strength.

Brent crude settled down 0.55 percent at $109.01 abarrel, though some traders said this was a consolidation aftera 2.5 percent gain the previous day, when reports of a sharpdrop in Libyan oil exports rekindled worries over global supply.U.S. crude settled down 0.5 percent at $98.20.

Libya's crude oil exports have dropped to less than 10percent of capacity as the government has struggled to reach adeal with protesters blocking its big eastern facilities, withsome demanding a greater share of the oil wealth.

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