Sawt Falasteen - Stocks advance, euro rallies

European stocks closed higher, with Frankfurt's DAX jumping 2.7 percent on hopes that Russia will resume gas deliveries by pipeline later this week.

"The nature of today’s gains was initially cautious and incremental in nature ... We got additional traction in the afternoon session on reports out of Moscow which indicated that gas flows out of the Nord Stream 1 pipeline would resume as scheduled on Thursday, albeit at a lower capacity," said market analyst Michael Hewson at CMC Markets.

Russia has halted gas deliveries to Germany via the Nord Stream 1 pipeline, ostensibly due to technical problems, but there have been widespread concerns Moscow won't restart deliveries on Thursday as scheduled in retaliation for European sanctions over Ukraine.

Deliveries via the pipeline are critical for Europe to fill its reserves to a sufficient level to make it through the winter without supply disruptions.

Markets have been worried Russia turning off the taps will push European economies into recession, particularly Germany, where several major industrial sectors are heavily dependent upon gas imports.

Wall Street's main stock indices were also strongly higher in late morning trading amid another raft of earnings reports and more signs the housing market is slowing from its torrid pace.

Asian equity indices closed mixed after an overnight sell-off on Wall Street fuelled by fresh recession worries on a Bloomberg report that iPhone-maker Apple plans to slow hiring and spending.

The euro meanwhile jumped around one percent against the dollar, as traders mulled whether the European Central Bank could hike interest rates more than expected to fight runaway inflation.

The ECB has signalled it would raise eurozone interest rates on Thursday for the first time in more than a decade but is under pressure to do more to tackle spiralling prices.

It intends to raise borrowing costs by a quarter point, the first such move since 2011.

"In all likelihood, the ECB will raise interest rates by 25 basis points this week and follow this up with a 50-basis-point move in September," noted Matthew Ryan, head of market strategy at financial firm Ebury.

"That said, we do not rule out a 50-basis-point rate hike at this week's meeting.

"We have already seen most major central banks deliver bumper rate increases in recent weeks in an attempt to control rampant price growth," Ryan added.

The Federal Reserve's aggressive rate tightening this year has sent the dollar soaring against most other currencies in recent weeks.

Last week, the euro fell below parity with the dollar for the first time in nearly 20 years, also on growing fears of a eurozone recession as high inflation hampers growth.

On Tuesday, the dollar briefly hit a record high above 80 rupees, with the Indian unit hammered by massive outflows of capital as the economy struggles.

While some are predicting inflation may have reached its peak, oil prices -- the key driver of soaring costs -- remain elevated.

But both main contracts dipped Tuesday after rocketing more than five percent Monday on expectations that Saudi Arabia would not open up the taps further, with a plea by US President Joe Biden seeming to have fallen on deaf ears.

- Key figures at around 1330 GMT -

New York - Dow: UP 1.7 percent at 31,596.54 points

EURO STOXX 50: UP 2.2 percent at 3,587.44

London - FTSE 100: UP 1.0 percent at 7,296.28 (close)

Frankfurt - DAX: UP 2.7 percent at 13,308.41 (close)

Paris - CAC 40: UP 1.8 percent at 6,201.22 (close)

Tokyo - Nikkei 225: UP 0.7 percent at 26,961.68 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 20,661.06 (close)

Shanghai - Composite: FLAT percent at 3,279.43 (close)

Euro/dollar: UP at $1.0235 from $1.0146 on Monday

Pound/dollar: UP at $1.2019 from $1.1950

Euro/pound: UP at 85.14 pence from 84.88 pence

Dollar/yen: DOWN at 137.86 yen from 138.13 yen

West Texas Intermediate: DOWN 0.7 percent at $101.85 per barrel

Brent North Sea crude: DOWN 0.6 percent at $105.64 per barrel

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Z.AlNajjar--SF-PST