* European stocks rise after Portugal bailout
* ECB rate rise ahead, euro weaker
By Jeremy Gaunt, European Investment Correspondent
LONDON, April 7 (Reuters) - European shares rose on Monday
on hopes that Portugal's decision to seek financial aid could
put a brake on the region's debt crisis, while the euro fell
ahead of an expected interest rate rise by European Central Bank
Portugal's caretaker government requested European Union aid
on Wednesday night at the urging of leading bankers who wanted a
bailout to help the economy and safeguard the country's banking
system.
The pan-European European FTSEurofirst 300 stock index
<> was up a quarter of a percent.
Further contagion in the debt crisis was not being ruled
out, but other countries that have been struggling, notably
Spain, are less likely to be drawn in.
"We all knew Portugal was going that way, Spain looks like
it is in a better position," said Will Hedden, sales trader at
IG Index,
But he added: "It is a bit early to say everything stops
with Portugal."
World stocks as measured by MSCI <.MIWD00000PUS> were flat
while emerging markets <.MSCIEF> took a step from a sharp rally
of the past few weeks to fall a quarter of a percent.
Japan's Nikkei <> closed up 0.07 percent, mainly due to
short-covering in energy and domestic-demand stocks.
ECB AHEAD
Portugal's bailout request, meanwhile, comes just as the ECB
is ready to raise interest rates in the face of gathering
inflationary pressure.
It was expected to raise its benchmark rate by 25 basis
points to 1.25 percent, the first rise since July 2008.
The euro slipped from an 11-month high against the yen and
14-month peak versus the dollar ahead of the well-flagged move
due later in the day, partly on concerns that the ECB may not
strongly signal a series of future hikes. []
"The euro has rallied considerably on the ECB rate hike view
but it may be the case of buy the rumour sell on the fact," said
Koji Fukaya, chief FX strategist at Credit Suisse, explaining
the day's moves.
"The euro zone debt crisis has not stopped the ECB from
making hawkish comments," Fukaya said. "That means Portugal's
story is not going to stop a rate hike."
The euro was at $1.4284 <EUR=> and 121.80 yen <EURJPY=>.
German government bonds edged lower after the Portugal
bailout move.
Yields on Portuguese 10-year bonds <PT10YT=TWEB> fell
slightly.
(Additional reporting by Natsuko Waki and Joanne Frearson;
Editing by Toby Chopra)
