* MSCI world equity index up 0.6 percent at 208.57
* Disappointing Nokia results push stocks off highs
* Yen holds near 13-year peak vs dollar; sterling still weak
By Natsuko Waki
LONDON, Jan 22 (Reuters) - World stocks halved earlier gains
after disappointing fourth-quarter earnings results from Nokia
<NOK1V.HE>, while European government bonds fell on concerns
that their countries may borrow more to boost the economy.
The yen rose towards a 13-1/2 year high against the dollar
and a seven-year peak versus the euro, while sterling fell again
towards the previous day's 23-year low against the dollar.
Top cellphone maker Nokia reported underlying Q4 earnings
per share of 0.26 euros, below the forecast of 0.30 euros. The
firm also warned market volumes would shrink some 10 perent this
year.
"Nokia's numbers have ruined the party and pulled down the
stock market," a trader said.
World stocks are still up from this week's seven-week low
thanks to Wednesday's surprisingly healthy earnings reports from
IBM <IBM.N>, Apple <AAPL.O> and Northern Trust <NTRS.O> and
rebounding banking and energy shares.
"We've had so much bad news recently that a bounce is always
inevitable, given the extent of the losses, people have been
overdoing the gloom," said Peter Dixon, economist at
Commerzbank.
The MSCI world equity index <.MIWD00000PUS> was up 0.6
percent, after rising more than 1 percent earlier.
The FTSEurofirst 300 index of leading European shares
<> was up 0.7 percent, also coming off highs. Emerging
stocks <.MSCIEF> rose 0.7 percent. U.S. stock futures were down
0.4 percent <SPc1>, pointing to a weaker open on Wall Street.
U.S. crude oil <CLc1> rose 0.5 percent to $43.78 a barrel.
The dollar lost 0.6 percent to 88.87 yen <JPY=> after
falling as low as 87.10 yen on Wednesday, the lowest since July
1995. Sterling was down 1.6 percent at $1.3759 <GBP=>, having
hit $1.3618 on Wednesday, its lowest since September 1985. The
British currency has fallen around 6 percent this week.
The dollar <.DXY> rose 0.4 percent against a basket of major
currencies.
GOVERNMENT DEBT CONCERNS
Government bonds were under pressure across the board as
investors unwound safer trades as stocks rebounded.
Also pressuring sovereign debt is concerns that the
governments would have to borrow huge amounts to help fund their
packages designed to support the economy.
The euro zone's second largest economy, France, sold a total
of 7.485 billion euros of government bonds on Thursday.
Worries about fiscal balance have driven the cost of
insuring sovereign debt of many major economies to record highs
in recent sessions, according to credit default swaps data.
Investors are also demanding more compensation to hold less
liquid euro zone debt than benchmark German government bonds.
Spreads of French 10-year bonds over German Bunds are around
60 basis points, their widest since the introduction of the
euro.
Portugal became the third euro zone economy this year to be
hit by a ratings downgrade late on Wednesday, as Standard &
Poor's cut its long-term rating to A+ from AA-, citing slow
economic reforms and deteriorating public finances.
The 10-year Portuguese/Bund spread hit a new wide of 153
basis points on Wednesday.
The March bund futures <FGBLc1> fell 45 ticks.
(Additional reporting by Blaise Robinson; Editing by Andy
Bruce)
