* World stocks gain modestly after recent losses
* Japanese shares up 0.3 percent, Europe down 0.4
* Euro gains against dollar
By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 14 (Reuters) - World stocks struggled to keep up
gains on Wednesday after their recent selloff while the euro
rose despite expectations of a rate cut later in the week from
the European Central Bank.
MSCI's all-country world stock index <.MIWD00000PUS> was up
0.2 percent, after losing close to 7 percent over the previous
five trading sessions.
Equity investors have struggled to keep a year-end rally
going, battered by worries about the state of the global economy
and uncertainty about the impact of numerous government
anti-recession proposals.
They have, however, settled into something of a trading
range with global stocks some 15 to 20 percent above a low
reached last November.
"We know the outlook is awful, but then we know that the
market has priced in a very bleak scenario. So you've got this
tug-of-war that occurs between the bad news and the deep
valuation (discount)," said Lee Mickelburough, a partner at
Perennial Growth Management in Australia.
The pan-European FTSEurofirst 300 <> index of top
European shares lost 0.6 percent although energy stocks were
boosted as crude <CLc1> rose $1.30 to around $39 a barrel. OPEC
kept up its talk of production cuts, and as a cold snap in the
United States boosted heating oil demand.
Japan's Nikkei average <> earlier eked out a 0.3
percent gain, up 24.54 points to 8,438.45. It had fallen 4.8
percent the previous day to its lowest close in a month.
The broader Topix <> rose 0.7 percent to 819.39.
RATE CUT AHEAD
The euro clawed back from one-month lows against the dollar
but the upside was capped before the European Central Bank's
policy-setting meeting later this week.
The ECB is widely expected to cut rates by 50 basis points
from the current 2.5 percent to help fight a broad economic
downturn. []
The euro was up 0.7 percent on the day at $1.3291 after
hitting a session high of $1.3335 <EUR=>. It had fallen to a
one-month low of $1.3140 on trading platform EBS the previous
day.
Against the yen, the single currency rose 1.4 percent to
119.29 yen <EURJPY=R>. It had hit a low of 117.13 yen on EBS on
Tuesday, the lowest since early December.
The euro's gains against the dollar, meanwhile, were also
limited after Spain and Portugal became the third and fourth
euro zone countries since last week to be warned by ratings
agency Standard & Poor's that their credit ratings are under
threat from the global financial crisis. []
"The surrounding environment for the euro is weak and there
are no reasons to favour the currency," said Nobuaki Kubo, vice
president at BBH Investment Services.
Two-year Schatz yields <EU2YT=RR> climbed 3 basis points to
1.546 percent, while 10-year Bund yielded <EU10YT=RR> 3.030
percent, up 5 basis points.
(Additional reporting by Tamawa Desai and Rafael Nam)
