* European, U.S. equities rise 1 percent or more
* Investors shrug off China's falling stocks
* U.S. Federal Reserve in focus
* Oil prices steady after touching six-months low
By Michael Connor
NEW YORK, July 28 (Reuters) - U.S. and European stock
markets climbed 1 percent or more on Tuesday, reversing five
days of declines, as investors looked past China's equities
sell-off and took buying cues from earnings and mergers news.
Prices of safe-haven government bonds eased, while the
dollar rallied on growing expectations the Federal Reserve, in a
policy statement due on Wednesday, could take a hawkish bias
toward raising interest rates. Oil prices recovered from
six-month lows and steadied on hopes U.S. crude stockpiles were
shrinking.
Wall Street's Dow Jones industrial average .DJI finished
ahead 189.68 points, or 1.09 percent, at 17,630.27, the S&P 500
.SPX rose 25.61 points, or 1.24 percent, to 2,093.25 and the
Nasdaq Composite .IXIC added 49.43 points, or 0.98 percent,
finishing at 5,089.21, according to preliminary data.
United Parcel Service (NYSE:UPS) UPS.N shares rose 4.8 percent and
Ford F.N gained 2 percent after each reported
higher-than-expected profits. The S&P energy sector index
.SPNY added 3 percent.
"The S&P has had five down days in a row and a lot of people
are starting to nibble," said Michael Matousek, head trader at
U.S. Global Investors Inc in San Antonio.
Merger news helped lift European stocks, with the
FTSEuroFirst 300 index of leading European shares closing up 1.1
percent at just under 1,546 points .FTEU3 .
RSA Insurance Group RSA.L rose 18 percent after Zurich
Insurance ZURN.VX said it was considering a bid for the
British group. Shares of Kering PRTP.PA surged 5.6 percent
after Gucci, the flagship brand of the French group, reported a
4.6 percent increase in underlying second-quarter sales.
The main China indexes fell again, although by nowhere near
as much as Monday's 8.5 percent. The Shanghai market benchmark
.SSEC closed 1.7 percent lower.
The Fed kicked off a two-day policy meeting. Since no
immediate change in interest rates is expected, attention
centered on whether Fed Chair Janet Yellen would signal
September or December as the most likely date for a rate
increase, the first since 2006.
U.S. stock market sentiment reflected expectations the Fed
would wait until December, Matousek said.
Oil prices steadied, with U.S. crude rising more than 1
percent as bets for a drop in U.S. crude stockpiles offset
worries about a global supply glut and China's market meltdown.
Brent futures LCOc1 settled down 17 cents, or 0.3 percent,
at $53.30 a barrel. They earlier fell to $52.28, the lowest
since early February.
U.S. crude futures CLc1 settled up 59 cents, or 1.2
percent, at $47.98 a barrel. They rose more than $1 at the
session high after touching their lowest since March at $46.68.
In currency markets, the dollar rose against some major
counterparts, including the euro and yen, as traders bet that
the first U.S. rate increase in almost a decade is still likely
to come in September.
The euro fell 0.4 percent to $1.1045 EUR= , after touching
a two-week high of $1.1129 on Monday. The dollar was up 0.30
percent against the yen at 123.57 yen JPY= .
Bond yields edged higher, with the 10-year U.S. Treasury off
7/32 in price and yielding 2.2553 percent US10YT=RR . The
comparable UK yield rose a basis point, while the yield on the
10-year German Bund was also up 1 basis point.
(Additional Reporting by Jamie McGeever; and Lionel Laurent;
Editing by Meredith Mazzilli, David Gregorio and Steve Orlofsky)