* Investors looking for clarity on Fed stimulus program
* Dollar index firmer but down from near three-year high
* Yen dips after Japanese minister says seeks 'balance' for
currency
* Commodities fall, gold and oil weaker on the day
By Ryan Vlastelica
NEW YORK, May 21 (Reuters) - Stock markets around the world
edged higher on Tuesday amid signs of improving growth, even
though questions about monetary policy limited gains.
The Dow Jones industrial average and S&P 500 ended at
all-time highs, while the dollar rose and gold fell.
The euro was slightly higher, though a slowdown in
British inflation sent sterling to a 7-week low on the
view it could give the Bank of England more leeway to support
the economy. The yen lost ground after a Japanese minister rowed
back on remarks suggesting the currency had weakened enough.
In the latest sign of improving sentiment, Goldman Sachs (NYSE: GS-PB - news)
forecast further gains for the S&P 500 this year, expecting it
to rise to 1,750 and then to 1,900 by the end of 2014. The
benchmark index is currently at 1,670 after gains of 17 percent
so far in 2013.
Much of those gains has come on an accommodative monetary
policy from the Federal Reserve, which analysts credit with
making equities more attractive than other asset classes. The
stimulus has pushed many financial markets to their highest
levels in years, but in recent weeks Fed officials have started
talking more openly about scaling back the central bank's
support.
The usually dovish Chicago Fed President Charles Evans said
on Monday that as long as the pick-up in the U.S. jobs market
continued, he was "open-minded" about slowing the bank's
bond-buying and mentioned the idea of simply halting it.
Comments like that have made Wednesday's release of minutes
from the U.S. central bank's last meeting and Fed Chairman Ben
Bernanke's testimony in Congress the main focus for markets
awaiting the first sign of a clear shift in attitude.
Markets are "nervous" ahead of the testimony, "but not
enough to take any action," said Kim Forrest, senior equity
research analyst at Fort Pitt Capital Group in Pittsburgh.
Economists expect Bernanke to deliver a steady message on
the bank's policy. But any hint that it plans to scale back its
support could unsettle markets.
"With the economic numbers being pretty good in the States,
there may be an easing back of QE (bond-buying stimulus) sooner
rather than later," said Berkeley Futures associate director
Richard Griffiths.
DOLLAR, U.S. STOCKS UP
The dollar was up 0.1 percent against a basket of
major currencies.
The Dow Jones industrial average gained 52.30 points,
or 0.34 percent, to close at 15,387.58. The Standard & Poor's
500 Index was up 2.87 points, or 0.17 percent, at
1,669.16. The Nasdaq Composite Index was up 5.69 points,
or 0.16 percent, at 3,502.12.
U.S. equities were boosted by Home Depot, which
raised its full-year profit outlook as it benefited from a
recovery in the housing market. Its shares rose 2.5 percent to
$78.71.
Financial shares were also higher, led by JPMorgan Chase (Other OTC: JPGMZ - news) &
Co., which rose 1.4 percent to $53.02 after shareholders
voted in support of Chairman and Chief Executive Jamie Dimon
maintaining both roles, rather than splitting them.
Top European shares ended 0.1 percent higher,
extending a rally that took them to five-year highs on Monday.
The MSCI all-country world equity index added
0.2 percent.
GREECE LIGHTENING
If the Fed does tighten policy by slowing its bond-buying,
benchmark bond yields would be pushed up. The benchmark 10-year
U.S. Treasury note was up 10/32, the yield at 1.928
percent. Safe-haven German Bund futures lost ground,
dropping 0.1 percent.
In Greece, 10-year yields fell below 30-year yields for the
first time in three years, popping its bond curve back into a
more normal shape in a sign that some are starting to believe
the worst may be over for the euro zone's most troubled economy.
"The perception of investors has changed," said ING
strategist Alessandro Giansanti in Amsterdam. "There has been a
change in trend in public finance policies. If the trend of
reduction in the deficit continues, we cannot rule out that even
next year (Greece) can come back to the market."
YEN, METALS YO-YO
Earlier in the day, Japan's Nikkei share index crept
to a 5-1/2-year high. The yen shed some of Monday's gains
after Japan's economy minister said his comments the previous
day that the government was satisfied with the level of the
currency had been misinterpreted.
A recent slide in precious metals also resumed. Gold
was down 1.5 percent as the stronger dollar left it facing its
eighth fall in nine sessions. Silver dropped 2.5 percent.
While low inflation prospects have dulled demand for the
traditional hedge of gold, silver has fallen out of favor with
investors recently as demand from the solar energy sector has
also sagged and mining of the metal has increased.
"The market was caught horribly short yesterday, so there
was some buying this morning. But the dollar started to get
stronger and gold didn't manage to break above $1,400, so sales
started again," said Marex Spectron head trader David Govett.
U.S. crude oil fell 0.6 percent on caution ahead of
Bernanke's testimony, while Brent crude fell 1 percent.
