* MSCI world equity index up 0.2 pct at 293.56
* Euro firmer, dollar falls back
* Govt bonds firm, oil rises
By Sujata Rao
LONDON, Dec 18 (Reuters) - The euro clawed back some of its
recent steep losses against the dollar and yen on Friday and
rose off nine-month lows versus the Swiss franc while higher oil
prices pushed European stocks higher in thin year-end trade.
Rumours of a coup in Pakistan had sent the safe-haven Swiss
franc surging but it slipped after the reports were denied, with
dealers saying the currency was also pressured by expectations
of intervention by the Swiss National Bank.
The single currency recovered some ground against the dollar
which had surged on Thursday to a three-month high against a
basket of currencies <.DXY> and received a further mild boost
from a higher-than-expected reading from German Ifo Institute's
sentiment index for December.
"The markets are fairly illiquid which is exaggerating
moves," said Lee Hardman, currency economist at Bank of
Tokyo-Mitsubishi UFG. "Momentum is key and you don't want to go
against momentum now."
The euro rose 0.4 percent to $1.4401 <EUR=> after falling
close to $1.4300 on Thursday, the lowest since early September.
It has been under pressure due to fiscal problems in euro
zone member Greece which has been hit by two ratings downgrades
this month -- the latest on Thursday by Standard & Poor's.
Risk appetite recovered slightly after Pakistani President
Asif Ali Zardari said there was no coup, dousing rumours that
started after a government minister suspected of corruption was
barred from leaving the country. []
OIL HELPS STOCKS
Crude oil rose 0.8 percent <CLc1> to $73.41 a barrel,
underpinned by signs of a recovery in U.S. demand and the
prospect of increased winter demand.
European stocks rose as those stronger oil prices pushed up
energy stocks and offset weakness in financials.
The FTSEurofirst 300 <>, the index of top European
shares was up 0.8 percent after losing 1.3 percent on Thursday.
Oil firms led the gains with BP <BP.L>, Royal Dutch Shell
<RDSa.L> and other oil firms adding 0.1-1.5 percent.
Banking shares however continued to decline, with most
European banks down 0.6 percent to 5.2 percent.
World stocks <.MIWD00000PUS> rose 0.3 percent. The index has
risen nearly 29 percent this year, on track for one of the
biggest gains in the past 20 years.
"Most of the people are getting cautious. Everybody is
closing books. They say 'OK we had a great year so why do we
have to risk more?'," said Koen de Leus, economist at KBC
Securities.
"We are at the end of the year so volumes are not going to
be very high."
Asian shares <.MIAPJ0000PUS> fell half a percent as Chinese
and Hong Kong bourses hit three-week closing lows on tough new
government regulations on the real estate and banking sectors.
Emerging equities <.MSCIEF> lost 0.15 percent. The index has
gained about 70 percent this year.
U.S. stocks are expected to open on a firmer note with
futures for the Dow Jones average <DJc2>, S&P 500 <.SPc1> and
the Nasdaq Composite all up 0.3-0.7 percent. []
In bond markets, 10-year Bund yields <EU10YT=RR> were little
changed at 3.152 percent, with analysts expecting the contract
to hold its recent gains, fuelled by the worries in Greece.
But the sell-off in Greek bonds stalled, leaving the 10-year
Greek yield over benchmark Bunds steady from late Thursday's 254
basis points and well off the 272 bps level hit on Thursday
after the S&P ratings downgrade. [].
(Reporting by Sujata Rao, editing by Mike Peacock)
