* Stocks rise in anticipation of Fed's policy meeting
* Dollar firmer before Fed meeting, tone stays defensive
* Oil rises above $81 as earlier weak dollar supports
* Bonds ease ahead of planned $74 bln auction this week (Updates with close of European markets)
By Herbert Lash
NEW YORK, Aug 9 (Reuters) - Global stocks rose and the dollar edged higher on Monday on growing expectations the U.S. Federal Reserve will signal this week it is prepared to renew its stimulus efforts to prop up an anemic U.S. economy.
Weaker-than-expected U.S. jobs data in July, released last Friday, fanned speculation the Fed may soon buy U.S. debt to support an economy that is showing signs of falling back into recession and to fight potential deflation.
The dollar edged higher against major currencies as investors were reluctant to place big bets ahead of the Fed's policy-setting meeting on Tuesday. For details see: [ID:nN09267891]
Volume was limited as traders and investors refrained from chasing prices aggressively, with many already pricing in some form of modest easing.
"The weak non-farm payrolls data before a Fed meeting is giving further confidence to the bond market's belief that the Fed will play to its dual mandate of both caretaker of the job market and advocate for price stability," said George Goncalves, head of U.S. rates strategy at Nomura Securities in New York.
U.S. stocks gained, but the Dow was weighed by shares of
Hewlett-Packard Co
"Today's trade is all about anticipation of tomorrow. The main question is, 'Will the Fed throw another quantitative easing bombshell?' And according to that, people are either buying or waiting on the sidelines," said John Canally, an economist at LPL Financial in Boston.
MSCI's all-country world index <.MIWD00000PUS> rose 0.4 percent, while its emerging markets index <.MSCIEF> rose 0.6 percent.
At 12:56 p.m., the Dow Jones industrial average <.DJI> was up 32.21 points, or 0.30 percent, at 10,685.77. The Standard & Poor's 500 Index <.SPX> was up 3.82 points, or 0.34 percent, at 1,125.46. The Nasdaq Composite Index <.IXIC> was up 10.33 points, or 0.45 percent, at 2,298.80
Against a basket of major currencies measured by the U.S. Dollar Index <.DXY>, the dollar rose 0.35 percent to 80.685.
Stocks in Europe and Asia rose as investors grabbed riskier assets on expectations the Fed may inject extra stimulus to maintain a recovery, helping lift sentiment. [ID:nLDE6781KQ]
European stocks gained after data showed German exports should approach record levels next year after beating forecasts in June, another sign that foreign demand is driving a stronger-than-expected recovery in Europe's largest economy.
Exports rose 3.8 percent, the Federal Statistics Office said, and analysts said the figure underpinned expectations that gross domestic product data due this week would show growth accelerated in the second quarter. [ID:nLDE6780N0]
The FTSEurofirst 300 <.FTEU3> index of top European shares climbed 1.4 percent to close at 1,071.26 points.
The rally in German government bonds paused, with investors reluctant to push higher ahead of the outcome of akeenly awaited U.S. central bank policy meeting. [ID:nLDE6781ID]
U.S. Treasuries were having a hard time attracting any safe-haven buying on Monday, however, with benchmark yields hovering near 15-month lows.
The benchmark 10-year U.S. Treasury note
Oil climbed above $81 a barrel, extending last week's 2 percent rise on earlier weakness in the dollar and tensions between the West and Iran. [ID:nSGE6780AX]
Iran showed off four new domestically made small submarines on Sunday that it said would bolster its defense capability as it vows to confront any military threat from countries opposed to its nuclear program. [ID:nLDE6770B1]
U.S. light sweet crude oil
Gold prices slipped a bit as the dollar recovered lost ground against the euro, but uncertainty ahead of a U.S. Federal Reserve policy meeting later this week supported the precious metal above $1,200 an ounce. [ID:nLDE6780QH]
Spot gold prices
The MSCI index of Asia Pacific ex-Japan equities rose 0.8 percent <.MIAPJ0000PUS> to its highest since May 4. Japan's Nikkei share average <.N225> fell 0.7 percent, however, due to the negative impact of a stronger yen on exporters. (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog click on http://blogs.reuters.com/hedgehub) (Reporting by Angela Moon, Wanfeng Zhou and Chris Reese in New York; David Sheppard and Atul Prakash in London; writing by Herbert Lash; Editing by Jan Paschal)