* World stocks slip, emerging shares get boost from India
* Indian equities gain 17 pct after election result
* Dollar, bonds rise as stocks fall
By Jeremy Gaunt, European Investment Correspondent
LONDON, May 18 (Reuters) - Equities in Europe and Japan fell
on Monday although emerging markets got a big boost from Indian
elections which raised hopes of a stable, pro-economic reform
government.
The dollar strengthened slightly against major currencies
after last's week four-month low.
India was a bright spot for equity investors with the
benchmark 30-share BSE index <> surging more than 17
percent before trading was halted for the day.
Prime Minister Manmohan Singh's coalition defied predictions
of a tight election result and was only about 11 seats short of
an outright majority following the vote count. []
A strong Indian coalition, free of the pressures from its
former communist partners, has boosted the prospect of reforms to
encourage growth in Asia's third-largest economy.
Elsewhere, however, the mood was generally downbeat. Some of
the gloss has gone from the equity rally which began in early
March as investors begin demanding more substantial signs of
global economic recovery before continuing to buy.
The FTSEurofirst 300 <> index of top European shares
was down 0.4 percent after losing 3 percent last week. Japan's
Nikkei <> lost 2.44 percent.
"The market is drifting back towards risk aversion after a
strong run," said Bernard McAlinden, investment strategist at
NCB Stockbrokers, in Dublin. Others, however, are not willing to
call an end to the rally that saw global stocks rise for nine
weeks before slipping last week.
"We think there is more upside, at least in the short term,
as inventory re-stocking and survey data suggest stronger
activity data ahead," Goldman Sachs said in a note. "After that,
deleveraging and a slow economic recovery is likely to bring a
pause. But long term, valuation points to strong returns."
UNCERTAINTIES
The dollar edged up against the euro and yen. Large
uncertainties surrounding the global economic outlook encouraged
investors to buy currencies which they perceived to be safe.
Data on Friday showing a bigger-than-expected contraction in
the euro zone economy highlighted that, although forward-looking
surveys and indicators may have shown improvement, this has yet
to be reflected in the more important hard economic data.
The euro fell 0.3 percent against the dollar <EUR=> as the
U.S. currency gained 0.1 percent against a basket of currencies
<.DXY>.
The dollar edged up 0.1 percent against the yen to 95.36
<JPY=>, rebounding from a two-month low of 94.55 yen struck
earlier on trading platform EBS.
Euro zone government bonds pushed higher as the retreat in
share prices spurred demand for lower risk government debt.
In the cash market, 10-year Bunds yielded 3.34 percent
<EU10YT=RR>, 3 basis points less than in late Friday trade while
the two-year Schatz yield <EU2YT=RR> was 3 basis points lower at
1.26 percent.
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http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Hub click on http://blogs.reuters.com/hedgehub)
