World stocks stay near all-time high after Fed signals

NEW YORK (Reuters) - An index of world equities stayed within reach of an all-time high on Wednesday as investors welcomed comments from Federal Reserve Chair Janet Yellen suggesting the U.S. central bank is in no rush to raise interest rates.

Markets were also supported by slightly better than expected Chinese factory activity data and U.S. sales of new homes.

Shares in Brazil fell, meanwhile, led by a 7 percent drop in Petrobras , the country's largest company, after its credit was downgraded to 'junk' status due to an ongoing corruption probe and concerns about liquidity. Brazil's Bovespa index <.BVSP> was down 1.3 percent.

MSCI's 46-country world index <.MIWD00000PUS> was up 0.1 percent at 433.29, nearing the 434.24 all-time peak it scaled in September.

Fed chief Yellen told the U.S. Senate Banking Committee that the bank was preparing to consider rate hikes "on a meeting-by-meeting basis" but it would provide markets with clearer signals before it moved.

Markets interpreted the testimony to suggest the Fed would start rate increases a bit later than expected, with a first hike likely around September. Yellen is repeating her testimony Wednesday to the House Financial Services Committee.

"For the rally to continue we now need two things. The recovery has to be driven by hard facts, the consumer and manufacturing. And we need the hope that the Fed won't be too aggressive with hiking rates, and yesterday we got that message," said Didier Duret, chief investment officer at ABN Amro.

Major Wall Street indexes were just off all-time highs. The Dow Jones industrial average <.DJI> fell 11.56 points, or 0.06 percent, to 18,197.63, the S&P 500 <.SPX> lost 1.78 points, or 0.08 percent, to 2,113.7 and the Nasdaq Composite <.IXIC> dropped 7.74 points, or 0.16 percent, to 4,960.38.

The dollar <.DXY> was down 0.25 percent in U.S. trading. The benchmark U.S. 10-year Treasury note was down 2/32 in price to yield 1.99 percent.

BONDS GOING LOWER

The euro zone's approval of Greece's reform plan on Tuesday, a requirement for Athens to receive a four-month extension to its bailout, continued to help European bonds.

Germany saw investors effectively pay to lend it money for five years for the first time at a bond auction. Irish yields hovered at a new low of just 1 percent, although Greece saw its yields nudge up.

European bourses edged lower after six days of gains. The benchmark FTSEurofirst 300 <.FTEU3> fell 0.3 percent Wednesday.

China's flash HSBC/Markit Purchasing Managers Index inched above the line denoting growth in activity, beating the consensus forecast for a slight contraction.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> gained 0.85 percent, but Japan's Nikkei <.N225> snapped a five-day climb after hitting a 15-year high the previous day.

Oil rose. Brent added about 50 cents to $59.15 a barrel and U.S. crude crept up to $49.53. Gold added about 0.85 percent to $1,208.50 per ounce.

(Additional reporting by Marc Jones in London; Editing by Alison Williams and James Dalgleish)

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