World stocks recovered after their 10th straight day of declines on Tuesday as Wall Street managed to put a brake on losses for the time being, with investors turning their attention to a meeting of the US Federal Reserve.

Even so, safe haven bets were still favored as gold hit another record high and investors pushed into the Swiss franc.

Fears of a new global economic downturn, reinforced by a downgrade of the United States' credit rating last Friday, and the debt crisis in the euro zone, had sent world shares down as much as 20 percent from May's peak, marking official bear market territory.   

MSCI's all-country world index recovered from earlier losses and was recently up 0.7 percent. The earlier drop put it on track for the 10th straight day of declines, which is extremely rare. The record is 13, back in the 1990s.

US stocks were up more than 2.0 percent shortly after the opening bell and European shares also bounced to gain 0.2 percent.

"There's so much volatility out there that both up days and down days are viewed as overdone," said Cort Gwon, chief strategist at HudsonView Capital Management in New York.

The Dow Jones industrial average gained 203.97 points, or 1.89 percent, to 11,013.82. The Standard & Poor's 500 Index rose 25.26 points, or 2.26 percent, to 1,144.72. The Nasdaq Composite Index climbed 60.89 points, or 2.58 percent, to 2,418.58.

The focus was on a meeting of the Fed with a statement due later in the day. Investors will be looking for hints on how the central bank may react to the market meltdown and support the struggling economy.

While the Fed is not expected to debut any massive new program to help asset prices, investors may return to selling if there's no indication that help is on the way.

"Investors are looking for stability. They didn't get it from the government, so the only place they can turn is the Fed," Gwon said. "If there's no indication of help, selling could come back."    

Higher-than-expected inflation data from China added to concerns about the global economy. The country's industrial output also grew at a slower pace in July at a time when the central bank is trying to keep prices in check without dragging down the economy.

Gold hit a record $1,778 an ounce in its biggest three-day rally since the financial crisis in late 2008. It gained more than three percent on Monday.

The Swiss franc surged to new all-time highs against the euro and the dollar in volatile trade. The euro tumbled through a low of 1.0605 francs hit in Asian trade, dropping to its lowest on record at 1.0475 francs, according to EBS data. - Reuters