* MSCI world equity index up more than 1.0 percent
* Yen backs down from record high of 76.25 per dollar
* European stocks, U.S. stocks higher; oil rises
(Updates prices)
By Al Yoon
NEW YORK, March 17 (Reuters) - European and U.S. stocks
rebounded from three days of selling on Thursday despite no
resolution to Japan's nuclear plant crisis, while the yen edged
off a record high against the U.S. dollar.
The yen's strength had markets speculating that Japanese
investors would sell overseas assets to bring home funds to pay
for reconstruction after Friday's earthquake and tsunami. The
yen hit a record high against the dollar of 76.25 yen <JPY=> as
Asian markets began trading.
The Group of Seven finance leaders and central bankers
planned to hold a conference call later on Thursday. Currency
traders have interpreted remarks by some officials as
indicating other central banks may give Japan their blessing to
intervene to drive the yen lower against the dollar.
[]
Developments at Japan's quake-hit nuclear plant were a
source of high anxiety for investors. Japanese military
helicopters dumped water and a water canon was used on an
overheating nuclear reactor, but radiation levels at the plant
remained high. For details, see []
"The absence of immediately worse news from Japan is
interpreted by equity traders as a reason to stop selling and
look for buying opportunities," Jim Vogel, an interest rate
strategist at FTN Financial in Memphis, Tennessee, said in a
note to customers.
The MSCI world equity index <.MIWD00000PUS> gained 1.2
percent after hitting a three-month low earlier in the week.
The index has now erased all of this year's gains.
Tokyo stocks ended down 1.4 percent <> on Thursday.
Earlier this week, Japanese stocks suffered their worst two-day
selloff since 1987.
The Thomson Reuters global stock index <.TRXFLDGLPU> gained
0.7 percent. The FTSEurofirst 300 index <> rose 1.8
percent as a recent sell-off attracted bargain hunters.
The Dow Jones industrial average <> rose 127.95 points,
or 1.10 percent, to 11,741.25. The Standard & Poor's 500 Index
<.SPX> increased 14.40 points, or 1.15 percent, to 1,271.28
and the Nasdaq Composite Index <> climbed 24.71 points, or
0.94 percent, to 2,641.53.
The index known as Wall Street's fear gauge, the VIX,
<.VIX>, fell 8 percent to 26.99 on Thursday, a day after
hitting its highest level since July.
Many traders, however, said there were still reasons to be
cautious as Japan had yet to contain its nuclear problem that
could exacerbate the natural disaster's economic toll.
"The drop has been violent, but the news flow remains very
alarming," said David Thebault, head of quantitative sales
trading at Global Equities in Paris. "There is short covering
at this point, and we continue to see outflows.
"Stocks might look oversold on the short term, but they are
not if we're heading into a bear market. The Japanese crisis
could have severe consequences for the global economy," he
said.
Emerging market stocks <.MSCIEF> fell 0.6 percent.
U.S. crude oil <CLc1> rose 3.4 percent to $101.34 a barrel
as unrest in Saudi Arabia, Bahrain and Libya heightened concern
about supply disruption while investors weighed the impact on
energy demand from quake-hit Japan.
The state-owned Bahrain Petroleum Co has partly shut down
production due to staff shortages caused by political unrest in
Bahrain, trade sources said. Bahrain arrested at least six
opposition leaders, a day after its crackdown on protests by
the Shi'ite Muslim majority raised fears of a regional
conflict. [][]
INTERVENTION THREAT
In New York, the yen traded at around 79.07 per dollar, off
the record high that traders feared could trigger intervention
by the Bank of Japan.
Japanese margin traders were cited as one of the main
factors behind the dollar's fall against the yen, as the break
of the yen's prior record high triggered automatic sell
orders.
Traders also said foreign investors were scrambling to get
hold of yen to settle margin calls on bets on Japanese shares,
forcing them to turn to spot currency at times as well as
forwards <JPYF=> and cross-currency swaps <JPYCBS=TKTL>.
Japanese Finance Minister Yoshihiko Noda blamed speculation
for the yen spike.
The dollar <.DXY> hit a four-month low against a basket of
major currencies. The euro rose 0.9 percent to $1.4026 <EUR=>.
Stabilization in Western stock markets reduced demand for
the safety of U.S. government debt. Benchmark 10-year note
yields rose 0.04 percentage point to 3.24 percent.
Gold <XAU=> rose $3.55 to $1,402.80 an ounce.
(Additional reporting by Blaise Robinson; Editing by Kenneth
Barry)
