* World stocks edge up after tech-led selloff
* Canadian dollar hits two-month high
* Short-dated U.S. yields hit multi-week peaks ahead of Fed
* European shares rebound from seven-week lows (Update prices, adds quote and oil settlements)
By Caroline Valetkevitch
NEW YORK, June 13 (Reuters) - World stock markets recovered after a technology-led selloff and short-dated U.S. bond yields hit multi-week peaks on Tuesday as investor focus turned to the Federal Reserve’s monetary policy meeting.
Technology shares edged higher after a two-session drop that put the spotlight on areas of the stock market where valuations appear stretched.
The U.S. central bank is widely expected to raise its benchmark interest rate on Wednesday and may also provide details on its plans to shrink $4.5 trillion of assets it amassed to nurse the economic recovery.
Analysts say the Fed could take an aggressively hawkish posture of signaling a balance sheet reduction this year and another rate increase in December.
“Wednesday’s meeting is pretty much a high-risk event,” said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.
The Bank of Japan and the Bank of England also meet this week, although no major policy changes are expected.
The gap between benchmark U.S and European bond yields held near its widest in a month as the Fed meeting also shone a light on the slow pace of change in European Central Bank policy.
The Canadian dollar hit a two-month high after Bank of Canada Governor Stephen Poloz said the central bank’s 2015 rate cuts “have largely done their work,” signaling that it could raise rates sooner than previously thought.
The U.S. dollar index was down 0.2 percent.
In the Treasury market, U.S. two-year yields touched 1.359 percent, their highest in a month, while three-year yields touched their highest since May 24 at 1.500 percent ahead of three- and 10-year note auctions on Monday.
Big technology names like Microsoft and Alphabet helped prop up U.S. stocks, though materials led sector gains. The S&P materials index was up 0.9 percent, and the S&P energy index, which is this year’s weakest-performing group, was up 0.6 percent.
The Dow Jones Industrial Average was up 88.05 points, or 0.41 percent, to 21,323.72, the S&P 500 had gained 9.98 points, or 0.41 percent, to 2,439.37 and the Nasdaq Composite had added 37.03 points, or 0.60 percent, to 6,212.50.
Tuesday’s stock market action reflected “a continuation of running up some of the areas that have not participated over the course of the last few months, in combination with some speculation that the Fed is going to be more resolute about raising rates,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
The pan-European STOXX 600 was up 0.6 percent, while MSCI’s gauge of stocks across the globe was up 0.5 percent.
Oil prices edged higher after OPEC detailed supply cuts around the world.
Brent crude futures rose 0.9 percent to settle at $48.72 per barrel, while benchmark U.S. crude gained 0.8 percent to settle at $46.46.
For Reuters 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 Sam Forgione, Lewis Krauskopf and David Gaffen in New York, John Geddie in London and Nichola Saminather in Singapore; Editing by James Dalgleish and Nick Zieminski