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European stocks up on Greek hopes; U.S. awaits Fed

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange February 17, 2015. REUTERS/Staff/remote

By Chuck Mikolajczak

NEW YORK (Reuters) - Stocks in Europe marched higher to close at multi-year highs on Wednesday as investors brushed off uncertainty over Greece's negotiations with its creditors.

Wall Street, meanwhile, was held in check ahead of the release of minutes of the Federal Reserve's January meeting at 2 p.m. (1900 GMT) as investors await clues on the U.S. central bank's plans to raise interest rates.

The Greek government said it will submit a request to extend a "loan agreement" for up to six months on Thursday but Germany said no such deal is on the table and Greece must stick to the terms of its bailout.

European Central Bank policymakers, meanwhile, debated whether to allow more emergency funding for Greek banks, with Germany opposing extra funding, people familiar with the matter said.

"A lot of people are focused on the Fed minutes but that issue is kind of interwoven with the situation in Europe," said David Lebovitz, global market strategist at J.P. Morgan Funds in New York.

"The massive amounts of monetary stimulus that have been deployed abroad are continuing to put upward pressure on the U.S. dollar, and I think that will make it hard for the Fed to raise rates."

Producer price data for January indicated U.S. inflation remained subdued, which could boost the argument against a rate hike by the Fed, while other economic data pointed to a slowly accelerating U.S. economy.

The data caused the yield on benchmark 10-year U.S. Treasuries to retreat after touching its highest since the first trading day of the year.

MSCI's all-country world stock index <.MIWD00000PUS> edged up 0.03 percent, while benchmark 10-year U.S. Treasury notes were up 4/32 in price to yield 2.1291 percent after touching a high of 2.164 percent.

The Dow Jones industrial average (.DJI) fell 55.49 points, or 0.31 percent, to 17,992.09, the S&P 500 (.SPX) lost 6.97 points, or 0.33 percent, to 2,093.37 and the Nasdaq Composite (.IXIC) dropped 7.83 points, or 0.16 percent, to 4,891.44.

The FTSEuroFirst 300 index (.FTEU3) of leading European shares rose 0.7 percent to a fresh seven-year high of 1,515.90. Greek stocks (.ATG) recovered some of the week's losses to finish 1.1 percent higher.

Brent crude oil (LCOc1) was down 2.7 percent at $60.82 and WTI crude (CLc1) was down 2.4 percent to $52.23 as rising inventories cut short a rally from earlier in the week. Brent is up around 35 percent from its low of near $45 a barrel barely a month ago.

The dollar (.DXY) was up 0.5 percent against a basket of major currencies, on expectations that the Federal minutes will support a trend of higher U.S. yields, while optimism over a possible Greek deal kept the euro (EUR=) within recent ranges.

(Additional reporting by Ryan Vlastelica; Editing by James Dalgleish)