* World stocks rebound on Wall Street's strength
* Italian banks drag down European stocks
* Oil prices up, bonds showed modest losses
* Euro hits 10-month high versus yen (Recasts and updates with focus on U.S. stocks' rebound)
By Barani Krishnan
NEW YORK, March 29 (Reuters) - Global stocks rebound on Tuesday, and the U.S. dollar rose too after a Federal Reserve official said the U.S. central bank's asset purchase plan should be curtailed.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.1 percent, after slipping about 0.3 percent earlier, mainly as a result of weakness in Europe. Emerging market stocks <.MSCIEF> gained around 0.4 percent.
U.S. stocks rose on strength in largely-capitalized technology stocks, after falling a day earlier on the lowest volume for 2011 due to worries about earnings.
Amazon.com Inc
Cisco Systems
The Dow Jones industrial average <.DJI> was up 58.43 points, or 0.48 percent, at 12,256.31. The Standard & Poor's 500 Index <.SPX> was up 4.80 points, or 0.37 percent, at 1,314.99. The Nasdaq Composite Index <.IXIC> was up 19.33 points, or 0.71 percent, at 2,750.01. [.N]
Despite the rebound, trading on Wall Street remained cautious due to the continuing global crises and the approach of the end of the first quarter.
"The quarter is ending with a lot of uncertainties out there, resulting in messy intraday moves at the same time that nothing is really happening," said Michael Shaoul, chairman of the New York-based Marketfield Asset Management, which oversees $973 million.
"There's nothing obvious about what investors need to do in this environment, and that's why you're seeing such low volume," he said. "No one has any reason to recommit capital."
European banking shares had earlier pushed world stocks lower on Tuesday after a surprise capital increase by an Italian bank.
The announcement by Italy's UBI Banca's
The FTSEurofirst 300 <.FTEU3> index of top European shares turned steady by 12:00 p.m. EDT (1600 GMT), after falling about 0.3 percent earlier.
"We are still very cautious on the banking sector as a whole," said Felicity Smith, fund manager at Bedlam Asset Management. "The big problem is that they need to hold more capital and that means in future, even if the economy grows, the returns they generate would be lower."
In the bond market, U.S. Treasuries showed modest losses as traders trimmed prices to entice buyers to the sale of $35 billion in five-year notes at 1.00 p.m. EDT (1700 GMT). [US/]
FED OFFICIAL'S COMMENT BOOST USD
The U.S. dollar rose against the euro after the president of the St. Louis Federal Reserve Bank, James Bullard, told an audience in Prague that the U.S. economy was strong enough to curtail the Fed's $600 billion asset purchase program by some $100 billion. [ID:nLDE72S0RJ].
The euro hit a session low of $1.4060 on the EBS trading
platform after falling through reported bids at $1.4080. It
last traded at $1.4085
Portugal's debt remained under pressure, with yields on its 10-year bonds near record levels above 8 percent, complicating the country's attempts to avoid a European Union bailout.
The dollar extended gains against the euro after data showed U.S. single family home prices fell for a seventh straight month in January, offering fresh evidence that the housing market recession in the United States was not over yet. [ID:nDZE7DS003].
Meanwhile, the dollar and euro both reached their highest levels against the yen since since March 18, when the Bank of Japan and other major central banks intervened to stop runaway yen gains.
The dollar rose to high of 82.42 yen
In commodity markets, uncertainty over events in Libya drove up the price of oil, as government troops under Muammar Gaddafi halted a rebel advance aimed at restoring oil exports from the OPEC member.
In commodity markets, U.S. crude oil's benchmark May
contract
U.S. copper prices also turned positive. But gold remained under pressure after Monday's losses as the prospect of interest rate increases undermined its appeal as an inflation hedge. [MET/L] [GOL/]
Analysts said unrest in the Middle East was lending broad support to oil and other commodities while Japan's nuclear crisis posed growth worries over demand for raw marterials.
"We have two factors that are countervailing," said Harry Tchilinguirian, analyst at BNP Paribas.
"There is a risk premium in the Middle East built in on risk of further contagion. On the other hand we have the fact Japan is a major component of the global supply chain, so the potential for a price correction in the second quarter remains." (Additional reporting by Atul Prakash, Jessica Mortimer and Richard Leong)