A statement from the Fed is expected around 1415 EDT (1815 GMT) and hopes that it will be forced into more action helped most stocks in Europe and Wall Street post solid gains.

Investors still remained worried, however, about the consequences of the U.S. credit downgrade, Europe's debt crisis and mounting expectations of a global recession. That's evident in the continued strength of traditional safe haven assets, like gold and the Swiss franc, which have been hitting regular record highs lately.

``While we are still not convinced the Fed is prepared to announce significant new monetary policy steps, changes in the statement aimed at supporting the financial markets are likely,'' said Vassili Serebriakov, an analyst at Wells Fargo Bank.

In Europe, the FTSE 100 index of leading British shares closed up 0.3 percent at 5,085 while France's CAC-40 rose 0.8 percent to 3,153. Germany's DAX though continued to underperform its peers, trading 0.3 percent lower at 5,899.

The Fed talk helped Wall Street recover following dizzying losses the previous session _ the Dow Jones industrial average was up 1.9 percent at 11,022 while the broader Standard & Poor's 500 index rose 2.3 percent to 1,145.

One option for the Fed is to announce that it is considering another monetary stimulus, which would be its third in the last three years. Kenneth Rogoff, a Harvard University economist, says that may be the only hope to help the U.S. avoid a Japan-style lost decade of low growth and benign prices.

Louise Cooper, a markets analyst at BGC Partners, said another stimulus could take equity markets up ``substantially'' though it ``may not pack quite the same punch.''

Stocks around the world were supported after August 2010, when the Fed announced a $600 billion monetary easing, which ended in June. Since that easing ended, ``chaos has ensued,'' Cooper said.

The recovery in stocks has come after many markets officially entered bear market territory, whereby they have fallen by over 20 percent since their peak as investors looked for relatively safer assets to park their cash, such as gold and the Swiss franc.

The other major worry in the markets remains Europe's debt crisis and here again there are signs that the recent stresses may be easing, albeit as a result of an intervention by the European Central Bank.

The European Central Bank stepped in Monday and bought billions of euros worth of their bonds. The move helped to lower yields on Spanish and Italian ten-year bonds around a percentage this week to a little over 5 percent _ a rate considered manageable for now. The euro was also fairly buoyant, rising 0.3 percent to $1.4221.

In the oil markets, recovering stocks helped oil prices recover. The main benchmark rate was up 30 cents at $81.61 a barrel. Earlier it had fallen to $75.71, its lowest since September 2010.

Stock markets in the traditionally oil-dependent Middle East were also volatile with the benchmark index in OPEC powerhouse Saudi Arabia, the region's largest economy, closing 0.8 percent at 6,009 points. Earlier it had been more than 4 percent lower. Egypt led the region's declines, with the EGX30 index plunging 4.7 percent to close at 4,478 points. The exchange temporarily halted trading late in the morning once broader indicators fell by more than 5 percent.

Earlier in Asia, Hong Kong's Hang Seng led the declines, tumbling 5.7 percent to 19,330.70. Other markets fell too, including Japan's Nikkei 225 stock average, which ended 1.7 percent lower at 8,944.48, having earlier traded 4 percent down. China's main market in Shanghai fared moderately better, closing less than a point lower only at 2,645.70.