* Euro above $1.42 vs USD on rate hike expectations
* Wall Street stocks boosted by AT&T's T-Mobile deal
* U.S.-traded Nikkei futures up 3.6 percent
* VIX posts largest daily drop since May
(Updates prices, changes quotes)
By Rodrigo Campos
NEW YORK, March 21 (Reuters) - Stocks in major world
markets rallied on Monday as the appetite for riskier assets
returned following some progress in resolving Japan's nuclear
plant crisis, while the yen slipped on speculation of further
market intervention.
Japan's markets were closed for a holiday, but the MSCI
index of Asian stocks outside of Japan <.MIAPJ0000PUS> rose 1.4
percent and U.S.-traded Nikkei futures advanced for a third
session.
The yen fell on investor concerns over more coordinated
actions by the world's major central banks to weaken the
Japanese currency following last week's intervention by the
Group of Seven.
Oil prices were higher after a second round of
U.N.-mandated airstrikes on Libya and spreading protests in the
Middle East reinforced concerns about potential supply
disruption.
In a sign of some normalcy returning to the markets
following Japan's earthquake, tsunami and nuclear plant crisis,
Wall Street's so-called fear gauge posted its largest daily
drop since May.
U.S. stocks were up about 1.5 percent on late Monday
trading in New York as investors welcomed AT&T Inc's <T.N> $39
billion offer to buy T-Mobile USA from Deutsche Telekom in what
would be the world's biggest deal this year and Germany's
biggest in a decade.
"The market has been really volatile and it will continue
to be really volatile. The AT&T deal is just a piece of it, the
other is a sense there is some better news out of Japan and
things haven't gotten any worse in Africa," said Gail Dudack,
chief investment strategist at Dudack Research Group in New
York.
ROBOT
The third day of gains in U.S. stocks followed two weeks of
losses over concerns about unrest in oil-producing North Africa
and the Middle East. Japan's earthquake and tsunami and the
ensuing nuclear crisis deepened investors' concerns about a
continued global economic recovery.
"The effects on oil from Libya to the US are very modest,
if at all. The Saudis are making up the difference (in output)
so it comes down more to politics than economics in Libya,"
Dudack said.
The CBOE volatility index <.VIX> tumbled 15.2 percent in
its largest daily percentage drop since last May.
It fell below its 14- and 200-day moving averages for the
first time since the earthquake in Japan.
The FTSEurofirst 300 <> index of top European shares
rose 1.75 percent to hit a one-week high and the MSCI world
share index <.MIWD00000PUS> jumped 1.5 percent, the largest
daily gain in seven weeks.
Experts said Japan's reconnection of power to its
earthquake-damaged reactors is a major step in managing its
nuclear crisis, but two smoking reactors and worries about food
safety showed the crisis was far from over. For details, see
[]
Equities got a boost after billionaire investor Warren
Buffett said the earthquake and tsunami are the kind of
extraordinary events that create a buying opportunity for
shares in Japanese companies. []
U.S. dollar-denominated Nikkei futures <NKc1> rose 3.6
percent and have gained roughly 11 percent in the last three
sessions.
YEN SLIPS, EURO HITS 4-MONTH HIGH
The yen added to losses, with speculators wary of more
coordinated actions by top central banks after joint G7
intervention last week hoisted the greenback nearly 4.0 percent
versus the Japanese currency. The U.S. dollar rose 0.2 percent
for the day to 80.97 yen <JPY=>.
The euro <EUR=> rose 0.3 percent above $1.42 against the
U.S. dollar for the first time since November as markets braced
for a euro zone interest rate hike as soon as next month.
A measure of the greenback against a basket of major
currencies fell to its lowest in 15 months.
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Libya Graphics
http://link.reuters.com/neg68r
Japan disaster in figures
http://r.reuters.com/ser58r
Japan disaster Top News page
[]
Picture, graphic packages:
http://r.reuters.com/wyb58r
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OIL PRICES FIRMER
Brent crude for May delivery <LCOc1> was up more than 90
cents at $114.86 a barrel after the attacks on Libya, aimed at
protecting civilians caught up in a revolt against the nation's
leader, Muammar Gaddafi. []
Brent has risen nearly 22 percent this quarter, with prices
buoyed by uncertainty over the unrest in North Africa and the
oil-producing Gulf region.
Oil traders have been also following Japan's crisis
closely.
"Concerns about demand in Japan were raised when smoke
started coming from one of the reactors, pulling crude off the
early highs. It's negative psychology for the market," said
Phil Flynn, analyst at PFGBest Research in Chicago.
U.S. Treasuries prices were hurt by reduced safe-haven
demand and extended losses after the Treasury said it will
begin to sell $142 billion of its agency-guaranteed
mortgage-backed securities. []
Benchmark 10-year notes <US10YT=RR> were last down 14/32 in
price to yield 3.32 percent, up from 3.28 percent late Friday.
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* For Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope blog http://blogs.reuters.com/macroscope
* For hedge fund blog http://blogs.reuters.com/hedgehub
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(Additional reporting by Wanfeng Zhou, Chuck Mikolajczak,
Karen Brettell, Robert Gibbons and Alejandro Barbajosa; Editing
by Andrew Hay)
