* MSCI world equity index up more than 1.0 percent
* Yen backs down from record high of 76.25 per dollar
* U.S., Europe shares rise as Japan stocks fell
* Oil climbs 3 pct on Middle East supply worry
(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.
Despite the rise in stocks, fear still clouded markets
across the globe as Japan's responses to its worsening nuclear
disaster looked increasingly desperate. New issues in the stock
and loans markets were postponed and equity trading volumes
dipped.
Fears that tensions in the Middle East and North Africa
added to the unease weighing on markets and drove oil prices up
nearly 4 percent.
The yen's strength may also have reflected expectations
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.
[]
The three-day decline in stocks brought back bargain
hunters, but volume on Wall Street was lackluster.
Developments at Japan's quake-hit nuclear plant still
unnerved 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 []
"As the headlines come out of Japan, there are more nervous
traders liquidating their long positions in futures put on this
morning," said Steve Leuer, stock-index futures trader at X-FA
Trading firm in Chicago.
The MSCI world equity index <.MIWD00000PUS> gained 1.3
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
0.8 percent. The FTSEurofirst 300 index <> rose 1.8
percent as a recent sell-off attracted bargain hunters.
The Dow Jones industrial average <> rose 161.29 points,
or 1.39 percent, at 11,774.59. The Standard & Poor's 500 Index
<.SPX> increased 16.84 points, or 1.34 percent, to 1,273.72 and
the Nasdaq Composite Index <> climbed 19.23 points, or
0.73 percent, to 2,636.05.
The index known as Wall Street's fear gauge, the VIX,
<.VIX>, fell 9 percent to 26.77 on Thursday, a day after
hitting its highest level since July.
Natural resource stocks were among key leaders as
commodities rebounded. Cliffs Natural Resources Inc <CLF.N>
rose 5.8 percent to $88.60 and Chevron Corp <CVX.N> gained 2.7
percent to $102.24.
The S&P energy index <.GSPE> rose 3 percent, leading gains
in the S&P 500, even though the prospect of higher fuel costs
have tempered stock investor enthusiasm in recent weeks.
Many traders warned there were still reasons to be cautious
as Japan had yet to contain its nuclear problem, which 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, he added.
In Europe, ISS, the Danish outsourcing group, pulled its
potential $2.8 billion stock market lisiting, becoming Europe's
biggest casuatly of choppy markets.
Emerging market stocks <.MSCIEF> fell 0.6 percent.
U.S. crude oil <CLc1> rose 3.4 percent to settle at $101.42
a barrel. Brent crude <LCOc1> for May delivery settled up 3.89
percent at $114.90, after hitting a session high of $115.39. It
was the biggest one-day percentage gain since Feb. 23. as
unrest in Saudi Arabia, Bahrain and Libya heightened concern
about supply disruption while investors weighed the impact on
energy demand from 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 78.96 per dollar, off
the record high set overnight.
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 0.8 percent to $1.4016 <EUR=>.
Stabilization in Western stock markets reduced demand for
the safety of U.S. government debt. Benchmark 10-year note
yields rose 0.06 percentage point to 3.26 percent.
Gold <XAU=> rose $5.15 to $1,404.40 an ounce.
(Additional reporting by Blaise Robinson and Angela Moon;
Editing by Leslie Adler)
