US shares up before Fed minutes

Worldwide markets have been jittery on interest rate fears

US stocks rose in early trading, reversing Tuesday's sell-off, on hopes that Federal Reserve minutes will show some members do not want a rate rise.

Analysts hope that the minutes, to be released at 1800GMT, will show that some members are less aggressive than was previously thought.

Earlier in May, the Federal Reserve said higher interest rates might be needed to counter rising energy prices.

The slight recovery came after a significant sell-off on Tuesday.

Continuing uncertainty

In midmorning trading the Dow index of leading stocks climbed 29.7 points, or 0.27%, to 11,124.13, while Standard & Poor's 500 index was up 4.45 points, or 0.35%, at 1.264.29

But fears over higher interest rates remain. Higher US interest rates could spark a slowdown in world growth and raise costs and lower profits for companies.

Lower oil prices combined with stronger bond markets helped stocks recover after Tuesday's heavy decline.

Oil was at $72.03 a barrel at 1515GMT having slipped below $72 in earlier trading, while data to be posted Thursday is expected to show that the oil supply has improved.

The slight upturn on Wednesday echoed a European share recovery in mid-morning trading.

French, German and UK shares rose higher as markets snapped up bargains in the telecoms and financial sector after an initial tumble at opening.

Earlier, shares in Japan and India had slipped as sentiment was hit by signs of cooling US economic conditions.

Spending curbed

Recent data has suggested that US consumers are tightening their purse strings in the face of surging oil prices, which have led to higher fuel and energy bills.

Concerns about a decline in US consumer spending which emerged on Tuesday weighed on Japanese exporters, with electronics giant Sony leading the falls.

Jitters over the health of the US economy pushed Japan's benchmark Nikkei index more than 300 points lower to a three-month closing low of 15,467.33.

India's stock exchange meanwhile recovered slightly Wednesday from Tuesday's 5% fall.

Analysts said uncertain global conditions had discouraged investors from entering the market.

"There is no doubt the prices are low enough, but few want to buy when conditions surrounding the market are quite unstable," said Ichiyoshi Investment chief fund manager Mitsushige Akino.

But on Wednesday, European markets closed higher after early morning falls.

The FTSE index of leading shares closed 72 points higher, or 1.3%, to 5724, while in Frankfurt the DAX index climbed 70 points, or 1.2%, to 5693, and the Paris CAC-40 rose 36 points, or 0.7% to 4930.

Dollar weakness

The US dollar also stabilised after showing more signs of weakness on Tuesday despite the appointment of a new US Treasury Secretary, Henry Paulson, the former boss of Wall Street investment firm Goldman Sachs.

"The market is thinking that Paulson may not really fight the declining dollar, so that's putting the dollar under pressure," said Antje Praefcke, currency strategist at Commerzbank in Frankfurt.

The Chinese central bank also sparked trading by remarks that suggesting it would be more flexible in allowing the value of the Chinese currency, the yuan, to fluctuate in the future.

This boosted the value of the Japanese yen, which is sometimes seen as a proxy for the yuan, whose value is still fixed in a narrow band.