* World stocks up 0.2 percent <.MIWD00000PUS>
* Fed meeting eyed; seen pausing on rates, new initiatives
* Financials lift stocks, UK employment data bites
* BOJ raises spending on government bonds by a third
By Veronica Brown
LONDON, March 18 (Reuters) - World share prices firmed on
Wednesday, while European government debt fell as rising
financial stocks and forecast-beating U.S. housing data prompted
more optimism among investors after the last week's rally.
But the stress that has scrambled markets for so long
remained on radars. The rare positive U.S. housing figure had no
impact on European credit markets, allowing indexes to widen,
while sterling dropped after Britain's unemployment rate spiked.
U.S. 10-year Treasury yields inched back above 3 percent and
drew in buyers, but the debt price gains were held in check as
attention turned to the Federal Reserve's policy outcome later
in the day, and speculation over whether it will purchase
long-dated bonds to keep interest rates low.
World stocks, as measured by MSCI's all country index rose
0.2 percent to 195.39 <.MIWD00000PUS>.
European financials gained, with UniCredit <CRDI.MI> up 12.24
percent, after the company posted a 38 percent fall in 2008 net
profit on Wednesday, ahead of analysts' forecasts
[].
A lot of the impetus came after figures on Tuesday showing a
22.2 percent surge in U.S. housing starts in February and
improved economic sentiment in Germany, the euro area's biggest
economy. []
"Equity markets are trying to shrug off the uncertainty of
the last months," market strategist Heino Ruland from Ruland
Research said of the concerted push to build gains.
But many analysts were sanguine on the recent purple patch
for stocks, wary of several false starts ahead of further
economic bad news.
"This is a correction but we're not going to go up every
day; one swallow does not make a summer," said Howard Wheeldon,
strategist at BGC markets.
That sense of caution was mirrored in European credit
markets. The Markit iTraxx Crossover index <ITEXO5Y=GF>, made up
of 50 mostly "junk"-rated credits, was at 1130 basis points at
1143 GMT, according to data from Markit, 25 basis points wider
versus late on Tuesday.
The investment-grade Markit iTraxx Europe index <ITEEU5Y=GF>
was at 191.25 basis points, 3.25 basis points wider.
On currency markets, the dollar was up 0.1 percent against a
basket of major currencies <.DXY>, while sterling dived to a
7-week low against the euro beyond 94 pence <EURGBP=> after data
showing Britain's jobless rose above 2 million. []
FED WATCH
Euro zone government bonds were on the back foot as market
participants waited for the U.S. Federal Open Market Committee
meeting outcome later in the day.
Bund futures <FGBLc1> traded 45 ticks lower at 122.16.
Leading central banks are taking or contemplating a range of
unconventional measures to keep borrowing costs at an ultra-low
level as they seek to drag economies out of a deep global
downturn.
The Swiss National Bank has combined a rate cut with FX and
bond market intervention, the Bank of England has started
purchasing government debt with freshly created money, while the
Bank of Japan has just sharply increased the level of debt it
will buy to support the economy.
But the Fed is probably going to hold fire on plans to buy
long-dated debt, analysts say, hoping that stimulus packages
implemented so far will kick in soon.
"Expectations (that the Fed will announce a move towards
buying U.S. government debt) have increased after the BoJ
decision, but I think they may be disappointed," said Antje
Prafcke at Commerzbank in Frankfurt.
The BOJ said overnight it was holding interest rates steady
at 0.1 percent and increasing its outright buying of Japanese
government bonds to 1.8 trillion yen ($18.28 billion) per month
from 1.4 trillion yen [].
(Additional reporting by Christoph Steiz and Natalie
Harrison in London; Editing by Ruth Pitchford)
