NEW YORK, May 27 — US and European stocks extended gains, while Treasuries fell amid optimism Greece has made progress in talks with its creditors. The dollar extended a rally on speculation US monetary policy will tighten as central banks around the world continue stimulus.

The Standard & Poor’s 500 Index climbed 0.6 per cent at 9.58am in New York, rebounding after its worst day in three weeks. The Stoxx Europe 600 Index rose 1.2 per cent, halting a three-day slide. The Bloomberg Dollar Spot Index climbed 0.2 per cent, for a seventh gain in eight days. The yield on 10-year Treasury notes added three basis points to 2.17 per cent.

Equities extended gains after an official with knowledge of the matter said Greece and its creditors have started crafting a staff level accord to solve its debt crisis. The best run of US economic data this year bolstered the case yesterday for higher interest rates, sending stocks in the US and Europe down by the most in at least two weeks.

“After the selloff yesterday, we are going to take a bit of a breather,” said Chad Morganlander, a money manager in Florham Park, New Jersey, for Stifel, Nicolaus & Co, which oversees about US$170 billion (RM617.8 billion). “The US dollar will continue to strengthen over the course of the next month and a half which will apply pressure to not only earnings but also economic data.”

Fed watch

The dollar is surging against other developed-market currencies, reaching an almost eight-year high versus the yen. While little changed today, the euro has sunk 2.1 per cent since May 21 to US$1.0878.

While the Federal Reserve moves closer to raising borrowing costs, central banks in Japan and Europe are pursuing currency- depreciating stimulus to spur inflation.

Among stocks moving today, Tiffany & Co jumped 11 per cent after posting quarterly profit that beat estimates. Michael Kors Holdings Ltd tumbled 19 per cent after its 2016 earnings forecast was short of projections. Hormel Foods Corp advanced 2 per cent after the maker of Spam agreed to buy closely held Applegate Farms LLC.

US equities slid yesterday as comments Friday from Fed Chair Janet Yellen that borrowing costs would be boosted this year were followed by data adding to evidence of a recovery in American economic growth after a first-quarter slowdown.

The selloff followed the slowest week this year for domestic stocks, which fluctuated in the smallest range in six months over the five days en route to a 0.2 per cent gain. The S&P 500 closed May 21 at a record.

The Stoxx 600 rose after losing 1 per cent in the past three days. Benchmark equity gauges of Greece and Italy climbed the most among western-European markets.

The Stoxx 600 has increased 19 per cent this year, reaching a record in April, as the European Central Bank started a bond- buying program. The measure resumed gains this month as the euro weakened.

Too steep

Imperial Tobacco Group Plc advanced 2.1 per cent after agreeing to buy Reynolds American Inc.’s Winston, Kool, Salem and Maverick. Aer Lingus Group Plc gained 2.6 per cent after IAG SA won backing from the Irish government to proceed with its takeover. IAG, the British Airways’ parent, rose 1.4 per cent.

“The decline in European stocks was far too steep and it was affected by the selloff in the US,” said Pierre Mouton, who helps oversee US$8.3 billion as a money manager at Notz, Stucki & Cie in Geneva. “Even though the markets may be afraid of a rate hike in the US sooner than they thought before, this doesn’t affect ECB policy and the European economy. We know Europe is healing.”

Stock gains were muted earlier as four international officials familiar with the matter said Greece will likely miss a deadline for a deal with creditors by the end of the week as the two sides make little progress in their talks.

The MSCI Emerging Markets Index decreased 0.9 per cent, its third day of losses. Benchmark gauges in Dubai, Qatar, South Korea, the Philippines and Indonesia fell more than 1 per cent.

Qatar’s benchmark index slide 1.5 per cent after Swiss authorities said they’re probing the vote that awarded the Gulf nation the right to host football’s 2022 World Cup.

The Shanghai Composite Index advanced 0.6 per cent in a seventh day of gains, approaching the 5,000 level for the first time since 2008. The Hang Seng China Enterprise Index retreated 0.7 per cent from a 2008 high.

Oil fell to a one-month low as investors weighed Iraqi plans for record exports against a forecast showing US crude inventories shrank for a fourth week. — Bloomberg