NEW YORK, Feb 27 — Wall Street and global shares rebounded today on positive economic data, but were still near six-week lows as investors remained nervous that they should prepare for higher interest rates in the United States and Europe.

US core capital goods orders accelerated in January, beating forecasts, according to government figures released today. A raft of euro zone inflation figures will also shape investor expectations for next month's central bank meetings.

At least six Federal Reserve policy makers are set to speak this week, potentially giving clues on potential rate hikes amid a confounding mix of economic signals.

Today morning The Dow Jones Industrial Average rose 0.69 per cent, to 33,042.65, the S&P 500 gained 0.79 per cent, to 4,001.48 and the Nasdaq Composite added 1.05 per cent, to 11,514.60.

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The MSCI All-World index of global shares was up 0.7 per cent, after dropping 2.6 per cent last week, its largest weekly decline since late September thanks to a sizzling rally in the dollar.

The index is heading for a 3 per cent decline in February, after a rally in January saw many major stock indices post their strongest performance for the first month of the year in years.

"With the equity market showing signs of exhaustion after the last Fed meeting, the S&P 500 is at critical technical support," Morgan Stanley US equity analysts wrote in a note today. "Given our view on earnings, March is a high risk month for the bear market to resume."

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January's euphoria, which was founded on expectations that the major economies will avoid tumbling into recession this year, has given way to something approaching realism about the outlook for interest rates, which are going to rise by more and stay at those levels for longer than many had previously anticipated.

"Fed speak this week...will emphasize the need for more rate hikes, as per usual by now," TD Securities strategists wrote in a note today. If economic data for February is as strong as it was in January, "some officials might signal upside risk to their rate outlook," they added.

Fed futures now have rates peaking at around 5.4 per cent, implying at least three more hikes from the current 4.50 per cent to 4.75 per cent band, and some chance of 50 basis points in March.

When the Fed concluded its last policy meeting in early February, prior to the release of bumper January employment and business-sector activity data, markets showed traders expected a peak rate of 4.73 per cent, meaning that there's almost an extra three-quarters of a point now priced in.

US two-year Treasury yields, the most sensitive to shifts in interest-rate expectations, have risen by almost 80 bps in that time, while the S&P 500 has lost 6 per cent in value from Feb. 2's five-month highs.

Today, the two-year US Treasury yield fell 2 basis points to 4.785 per cent, while 10-year Treasury yields dropped 3.9 basis points to 3.910 per cent.

Stocks recoup some losses

European stocks bounced back today, as typically rate-sensitive sectors such as oil and gas and technology picked up after falling sharply last week by 1.4 per cent and 3.8 per cent respectively.

The STOXX 600, which last week lost 1.4 per cent, was up about 1.3 per cent.

Economists at UK banks Barclays and Natwest both said they believe the Fed could raise rates by as much as half a percentage point in March, well above the quarter-point that markets currently price in.

It's not just the United States where investors believe the central bank will have to keep raising rates to bring inflation back down. Money markets show traders believe the European Central Bank and the Bank of England will have to lift rates to a higher peak and leave them there for longer.

Bruce Kasman, head of economic research at JPMorgan, has added another quarter-point hike to the ECB outlook, taking it to 100 basis points. Germany's 2-year bond yield broke above 3.0 per cent on Friday for the first time since 2008.

"The risk is clearly skewed toward greater action from the Fed," says Kasman.

The dollar has been the main beneficiary of the shift in expectations for Fed rates.

It has risen by 3 per cent this month against a basket of major currencies, which would mark its strongest monthly performance since September, when it hit 20-year highs.

The dollar was last down 0.3 per cent on the day, pushed in part by gains in the pound, which was last up 0.7 per cent amid renewed speculation Britain and the European Union will finalise a Northern Ireland deal, which could resolve post-Brexit tensions.

Oil prices edged lower

today as the dollar's recent strength discouraged buying, though losses were limited by supply concerns after Russia halted exports to Poland via a key pipeline. US crude fell 0.5 per cent to $75.94 per barrel and Brent was at $82.72, down 0.53 per cent on the day.

Spot gold added 0.2 per cent to $1,814.10 an ounce. — Reuters