* MSCI World up 0.38 pct, EM stocks up 0.42 pct
* Wall Street set to open up 0.46 percent
* Euro bouyed by short-covering as European stocks rise
By Claire Milhench
LONDON, May 18 (Reuters) - Global stocks edged higher on
Tuesday on cautious optimism that progress is being made on the
week-old euro zone rescue plan, whilst the euro found support
from short-covering and bond spreads tightened.
Wall Street looked set to open higher.
Markets steadied after investors took heart from promises by
euro zone finance ministers that they will clarify this week
some technical and legal details of the 750 billion euro ($925
billion) rescue plan [].
A report that Greece was starting to receive emergency aid
from the European Union supported bond markets [],
as the 14.5 billion euro loan came just in time to pay an 8.5
billion euro bond which matures on Wednesday.
The 10-year Greek/German government bond yield spread
tightened and the cost of insuring against a Greek default fell,
helping to support the euro.
"Some of the market instability has started to subside, at
least for the moment," said Robert Minikin, currency strategist
at Standard Chartered.
World stocks as measured by the MSCI All-Country index
<.MIWD00000PUS> were up 0.38 percent whilst its emerging markets
compoment <.MSCIEF> was up 0.42 percent.
Earlier, Asian stocks had fallen to three-month lows as
traders continued to fret about the impact of euro zone spending
cuts on exporters. In Japan, the Nikkei <> closed little
changed after a choppy session.
The FTSEurofirst 300 <> index of top European shares
edged up 0.96 percent, with banks and commodity stocks such as
energy and mining companies gaining.
EURO BENEFITS
The euro <EUR=> benefited from a round of short-covering as
the uptick in European stocks encouraged some traders to unwind
their bets against the struggling currency.
The euro was trading at $1.2417, up 0.20 percent on the day.
It lost some ground after German think tank ZEW said its survey
on economic sentiment in May had fallen more than expected
[].
Analysts believe the euro will remain under pressure over
the longer term.
The U.S. dollar was little changed versus a currency basket
<.DXY> at 86.239, and against the yen <JPY=> at 92.70 yen.
The pound <GBP=> fell 0.23 percent to $1.445, after hitting
a high of $1.4522 when government data showed inflation jumped
more than expected in April [].
In the fixed income markets, comments from European Union
Economic and Monetary Affairs Commissioner Olli Rehn that not
all countries would need to accelerate fiscal consolidation
supported a slight rise in risk appetite. []
On Monday the European Central Bank revealed that it had
purchased 16.5 billion euros of bonds through its Securities
Market Programme between May 10 and 14.
It also laid out plans to sterilise its government bond
purchases [] in an attempt to allay fears that its
activities will lead to a surge in inflation.
"The ECB has clarified its intervention," said Bernard
McAlinden, an investment strategist at NCB Stockbrokers in
Dublin. "The market is less concerned that the ECB is engaged in
outright money printing."
The 10-year Greek/German government bond yield spread was
tighter on the day at 525 basis points, from about 552 at
Monday's close. Meanwhile the cost of insuring against Greek
default also tightened, by 33 basis points, to 620 basis points.
(Additional reporting by William James, Brian Gorman, Naomi
Tajitsu; editing by Stephen Nisbet)
