* Nasdaq hits intraday record high
* Fed flags possible Dec rate hike, outlook more dovish
* Dollar falls
(Adds European shares' close, updates prices)
By Caroline Valetkevitch
NEW YORK, Sept 22 World stock indexes advanced
and the Nasdaq hit a record high on Thursday while bonds
rallied, a day after the U.S. Federal Reserve signaled an
increasingly cautious approach to future U.S. interest rate
The dollar fell to its lowest in a week against a basket of
major currencies as investors sold the greenback following the
Fed's reduction of longer-term interest rate expectations.
The Fed said it could hike rates by year-end as the labor
market improved further, but scaled back the number of rate
increases expected in 2017 and 2018. It also reduced its
longer-run rate forecast to 2.9 percent from 3 percent.
That left investors feeling that any monetary policy
tightening would be leisurely at best. Market pricing for a
December move rose only a fraction to 59.3 percent from 59.2
percent, according to CME Group's FedWatch tool.
"The Fed probably appeared less hawkish than what the
markets had expected," said Ryan Larson, head of equity trading
at RBC Global Asset Management in Chicago. "I think the market
continues to be focused on the Fed pushing a hike for later as a
good thing rather than bad."
The Dow Jones industrial average was up 125.33
points, or 0.69 percent, to 18,419.03, the S&P 500 gained
15.04 points, or 0.7 percent, to 2,178.16 and the Nasdaq
Composite added 44.34 points, or 0.84 percent, to
MSCI's all-country world stock index was up
1.1 percent, while Europe's STOXX 600 closed up 1.6
In the bond market, benchmark U.S. yields hit near two-week
lows on revived bets the Fed would raise rates slowly due to
weak economic growth and inflation stuck below its 2-percent
Benchmark 10-year Treasury notes rose 12/32 in price for a
yield of 1.627 percent, down 4 basis points from Wednesday.
The dollar index dropped 0.3 percent to 95.380.
Oil prices climbed for a second day on U.S. government data
that showed a surprising crude inventory drop, but the advance
was limited by trader worries that OPEC was not nearing an
agreement to reduce a global glut.
U.S. crude was up $1, or 2.2 percent, at $46.34 a
barrel, while Brent crude futures rose 65 cents, or 1.4
percent, to $47.48.
In other commodities, gold hit a two-week high, with spot
gold last up 0.2 percent at $1,339.46 an ounce.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Yashaswini Swamynathan in Bengaluru
and Marc Jones in London; Editing by Nick Zieminski and