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(Reuters) – Stocks edged higher around the world on Tuesday, with U.S. markets in particular buoyed by end-of-quarter buying by funds and a higher-than-expected reading of confidence among American consumers.

However, lingering concerns over Spain’s funding problems and renewed worries about global growth limited gains.

U.S. stocks rose at the open after comments late on Monday from the president of the San Francisco Fed suggested the central bank was not done taking action to stimulate the economy.

But a pessimistic outlook from Caterpillar (CAT.N) capped gains and some investors cautioned the advance may be due to window-dressing for the end of the quarter. .N

U.S. stocks were supported by a private sector report showing U.S. consumer confidence jumped to its highest level in seven months in September as Americans were more optimistic about the job market and income prospects.

The MSCI world equity index .MIWD00000PUS rose 0.4 percent to 337.48. European shares .FTEU3 also gained 0.4 percent.

“A lot of people are buying equities today because they’ve been underexposed to the market. It isn’t necessarily a call on fundamentals,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

“Money managers who haven’t believed in the rally don’t want to compound that error by showing a lack of exposure at the end of the quarter.”

The Dow Jones industrial average .DJI was up 26.41 points, or 0.19 percent, at 13,585.33. The Standard & Poor’s 500 Index .SPX was up 2.58 points, or 0.18 percent, at 1,459.47. The Nasdaq Composite Index .IXIC was up 7.12 points, or 0.23 percent, at 3,167.90.

Caterpillar shares (CAT.N) fell 2.1 percent in New York trade. Just minutes before markets closed on Monday, Caterpillar Inc cut its 2015 profit outlook, warning that weaker commodity prices would result in a bigger-than-expected decline in demand. <ID: nL1E8KOGZR>.

EURO HIGHER

U.S. data showed single-family home prices rose for a sixth month in a row in July, though the improvement was not as strong as expected and had minimal impact on trading.

The euro rose 0.3 percent at $1.2965, still about two cents from the 4-1/2-month peak posted last week after the U.S. Federal Reserve announced further quantitative easing earlier this month.

The euro extended gains against the greenback after the U.S. consumer confidence data. The overall support for the single currency rally in recent weeks was the European Central Bank’s offer to provide bailout funds to indebted governments – if they seek its help and are willing to accept tough conditions.

But investors were not making huge bets.

“Fears about Europe’s situation remain among investors, with the focus mostly on Spain, butGreece is also still a concern,” said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.

At the center of market concerns is what happens next in Spain, where the government is due this week to present its draft budget for 2013, outline new structural reforms for the economy and release the results of stress tests on the banking sector.

There are also concerns about Greece, which is due to hear soon from the “troika” of international lenders – the IMF, ECB and European Commission – on the prospects of further loans to financegovernment outlays.

U.S. Treasury debt prices were lower. The benchmark 10-year U.S. Treasury note was down 3/32, the yield at 1.7233 percent.

After the recent central bank actions, many investors have become convinced that markets can rally further. But they believe any gains are highly dependent on signs the slowdown in the global economy has bottomed.

“The majority of central banks are in total, outspoken reflationary mode. That’s a big story,” said Didier Duret, chief investment officer at ABN Amro Private Banking in London.

“They are intervening actively for a very clear reasons: to support the economy in the U.S., to support the funding in Europe and to support also the economies in emerging markets.”

Duret said the main trigger for the next move up will likely be signs of a strengthening U.S. recovery.

Oil drew some support from the rise in tensions in the Middle East.

Washington on Monday cleared the path for tighter sanctions against Iran to curb its nuclear ambitions, while Tehran renewed its rhetoric against Israel, intensifying worries about a conflict between the two that could have an impact on crude supplies from the region.

These worries sent Brent crude futures up 1.1 percent to $111.00 per barrel. U.S. crude was up $0.94 to $92.86 a barrel.

(Reporting by Nick Olivari; Additional reporting by Chuck Mikolajczak, Ryan Vlastelica, Richard Leong and Julie Haviv in New York and Richard Hubbard in London; Editing by Dan Grebler)