By Sinead Carew
NEW YORK (Reuters) - World stock markets fell on Wednesday but stayed within reach of an all-time high as investors welcomed Tuesday's comments from U.S. Federal Reserve Chair Janet Yellen suggesting that the U.S. central bank is in no rush raise interest rates.
Markets, still on a high after the euro zone agreed to extend Greece's debt deal, were also supported by slightly better than expected Chinese factory activity data.
The S&P 500 <.SPX> index of U.S. companies was slightly down and the Dow <.DJI> was barely up a day after they hit records on U.S. housing market data and at the start of a second day of testimony from Federal Reserve Chair Janet Yellen. [.N]
The benchmark FTSEurofirst 300 <.FTEU3> index was down 0.33 percent after six days of unbroken gains but was still up 12 percent since the end of 2014.
Following Wall Street's gains on Tuesday and more rises in Asia overnight, MSCI's 46-country world index <.MIWD00000PUS> was up 0.05 percent at 433.05 points and veering close to the 434.24 all-time peak it scaled in September.
"There is a pregnant pause in the market this morning," said Peter Kenny, chief market strategist at Clearpool Group in New York.
"Markets are waiting to see if there is any further insight into the timeline in the normalization of rates, any shift in terminology that would indicate a more certain timeline or a significant shift in that timeline."
The Dow Jones industrial average <.DJI> rose 4.65 points, or 0.03 percent, to 18,213.84, the S&P 500 <.SPX> lost 0.9 points, or 0.04 percent, to 2,114.58 and the Nasdaq Composite <.IXIC> added 2.98 points, or 0.06 percent, to 4,971.10.
Weakening global growth has been keeping investors on edge about the Fed's plans, with some worrying that a premature start to a rate-hike cycle there could drain momentum from the U.S. economy while Europe and China continue to struggle.
But Fed chief Yellen reassured investors by telling Washington's Senate Banking Committee the Fed was preparing to consider rate hikes "on a meeting-by-meeting basis" and that it would provide markets with clearer signals before it moved.
That marked a subtle change in how the Fed speaks about its plans, suggesting that although a hike could still come as early as June, it could also happen later in view of weak U.S. inflation and a sluggish global economy.
The dollar <.DXY> was down 0.23 percent against a basket of currencies after U.S. markets started trading.
In China, the world's second largest economy, the closely watched flash HSBC/Markit Purchasing Managers' Index inched above the line denoting growth in activity, beating the consensus forecast for a slight contraction due to risks from weak foreign demand and deepening deflationary pressures.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> ended up 0.85 percent, but Japan's Nikkei <.N225> snapped a five-day climb after hitting a 15-year high the previous day.
U.S. crude oil fell 17 cents to $49.11 a barrel on expectations that U.S. crude inventories will rise again while Brent
(Additional reporting by Chuck Mikolajczak, Editing by Alison Williams and Chizu Nomiyama)
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