* MSCI World down 0.6 pct, emerging markets down 1.9 pct
* FTSEurofirst up 1 pct, led by BP oil-spill relief
* Wall Street seen opening up 0.3 pct
By Claire Milhench
LONDON, May 17 (Reuters) - Stocks steadied and the euro
bounced off four-year lows on Monday as wary European markets
seized on positive company news and bought back into the single
currency on a squeeze of short trading positions.
Wall Street looked set to open slightly higher after a
selloff of more than 1.5 percent on Friday.
European and global stocks retraced early morning losses
sparked by fears that European austerity measures would smother
the region's fragile recovery, while a brief widening of Greek
government bond yield spreads versus German bunds reversed.
By early afternoon the spread between Greek and German
10-year government bonds was little changed at 546 basis points.
Core euro zone government bond prices fell, with some
traders citing central bank debt buying of peripheral debt while
others said Bunds had been overbought.
On Sunday, German Chancellor Angela Merkel said that a $1
trillion EU/IMF bailout plan had only bought the euro zone time
to tackle its fundamental problem -- a yawning gap between its
strongest and weakest economies []. This had
triggered a flight to safety.
"It's been a choppy session in price terms, but Bunds have
gone down because equities turned positive, U.S. Treasuries shed
gains and Bunds were overbought early in the session," said a
dealer in London.
The FTSEurofirst 300 <> index of top European shares
was up 1.03 percent after oil major BP <BP.L> reported some
progress in containing the oil gushing out of its ruptured well
into the Gulf of Mexico.
Banks, which have been amongst the biggest losers in the
recent turmoil, were also mostly higher.
The MSCI All-Country index <.MIWD00000PUS> was down 0.55
percent, with its more volatile emerging markets component
<.MSCIEF> down 1.87 percent.
Earlier in Japan, the Nikkei had closed at a 10-week low,
down 2.17 percent, mirroring falls in the rest of the region as
investors fretted about prospects for exporters to the West.
EURO ERASES LOSSES
The euro <EUR=> managed to erase its early losses against
the dollar to trade flat on the day at $1.235, but was still
almost 14 percent lower year to date, making it the worst
performing major currency.
"The euro is caught between a rock and a hard place at the
moment, and it is hard to see how it can extract itself from
this uncomfortable position in the near term at least," said
Howard Archer, chief UK and European economist at IHS Global
Insight in a note.
"Indeed, we suspect that the euro is headed down towards
$1.15 over the coming weeks."
Sterling was down 0.7 percent against the dollar <GBP=> to
$1.443.
(Additional reporting by Brian Gorman and George Matlock;
editing by John Stonestreet)
