NEW YORK World shares advanced modestly on Wednesday as policymakers in Europe reassured markets that a deal on releasing emergency aid to Greece was close, while a cease-fire in the Middle East further boosted optimism.
Gains were limited going into the U.S. Thanksgiving holiday, however, as the failure of European lenders to come to an agreement on Greece kept investors cautious. Trading was extremely light ahead of the U.S. trading holiday on Thursday.
Euro zone finance ministers, the International Monetary Fund and the European Central Bank will gather again on Monday, after nearly 12 hours of talks overnight in Brussels failed to produce a consensus on how to shrink Greece's debt.
After the meeting ended, French Finance Minister Pierre Moscovici said a deal was just "a whisker away," while European paymaster Germany said a plan was being developed to provide Greece with funding until 2016.
"European exchanges themselves are doing OK, so investors are saying 'We didn't really expect a resolution (on Greece), just kind of learning to live with it,'" said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average gained 48.38 points, or 0.38 percent, at 12,836.89. The Standard & Poor's 500 Index was up 3.22 points, or 0.23 percent, at 1,391.03. The Nasdaq Composite Index was up 9.87 points, or 0.34 percent, at 2,926.55.
U.S. investors digested the latest economic data, including weekly jobless claims that met expectations and a final read on November consumer sentiment that was below forecasts.
Market participants remained anxious about automatic tax and spending changes - known as the "fiscal cliff" - poised to take effect in the new year, though policymakers are not expected to return to negotiations until after Thanksgiving.
The benchmark 10-year U.S. Treasury note was down 5/32, the yield at 1.6848 percent.
Shares in Europe rebounded from early losses. The FTSEurofirst 300 index of top shares closed 0.3 percent higher, while the Euro STOXX 50 recouped from an earlier drop to add 0.5 percent.
The MSCI world equity index rose 0.2 percent.
The euro rose less than 0.1 percent to $1.2824, though it rebounded from an earlier drop of as much as 0.5 percent.
Prices for German debt, the safest in the euro zone, had eased slightly, sending 10-year yields down modestly to 1.428 percent.
However, a sale of 3.25 billion euros of new German 10-year debt, which paid an interest rate of 1.5 percent,
drew solid demand from investors worried about the outlook.
World equity markets had come under pressure on Tuesday after Federal Reserve Chairman Ben Bernanke warned that the central bank lacked the tools to cushion the impact of a potential U.S. fiscal crisis.
Bernanke said worries over fiscal negotiations, aimed at preventing the mandatory tax increases and spending cuts early next year, had already damaged growth in the world's largest economy.
His comments snapped a two-day rally on Wall Street on Tuesday.
Asian shares initially fell Wednesday on news of the Greek aid-payment delay, but closed modestly higher, buoyed by gains in mainland Chinese markets and in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent, while Japan's Nikkei stock average closed up 0.9 percent at a two month-high.
The Nikkei's gains came as shares of exporters rose after the yen hit a seven-month low against the dollar on expectations a new government will aggressively push the Bank of Japan to expand monetary stimulus.
Japan's opposition Liberal Democratic Party, tipped to win next month's general election, also promised to boost spending as it emerged that exports had fallen in annual terms for a fifth straight month in October.
The yen later rose 1.1 percent against the dollar, rebounding from its weakest level since early April. The U.S. dollar was flat against a basket of currencies, while Brent crude erased earlier losses to rise 1.1 percent to $111.
Oil investors continued to watch tensions in the Middle East even as a cease-fire was declared to end violence between Israel and Hamas, which many had feared could disrupt oil flows. Concerns about Greece and the impact it could have on international growth, however, weighed on crude prices and kept commodity prices volatile.
"There are opposing forces where the uncertainty in Europe and the United States meets with the bullish uncertainty in the Middle East ... so I think we're going to see a volatile market," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
(Additional reporting by Chuck Mikolajczak; Editing by Bernadette Baum and Dan Grebler)