* Euro bounces off four-year low vs dollar on China comments
* China refutes report it's reviewing euro bond holdings
* Stocks advance helped by bargain-hunting
By Emelia Sithole-Matarise
LONDON, May 27 (Reuters) - The euro rebounded from near
four-year lows against the dollar and European shares rose on
Thursday after China denied a report it was reviewing its
investments in euro zone debt.
U.S. crude oil futures <CLc1> rose $1 to $72.51 a barrel as
stock markets pushed higher, bolstering the positive sentiment
from data showing a surge in U.S. demand.
The ailing euro received badly needed support from the
Chinese central bank which said Europe remained a key investment
market for its foreign exchange reserves. []
The euro had shed 1.5 percent after the Financial Times
reported that China's State Administration of Foreign Exchange
(SAFE) was meeting foreign bankers because of concerns about its
exposure to debt troubles in Europe.
That report was groundless, said SAFE, the arm of the
central bank that manages China's $2.4 trillion in foreign
exchange reserves, the world's largest stockpile.
"The China comments downplaying the alleged change in
diversification policy are reassuring on the surface and that
has helped the euro rise," said Lee Hardman, currency analyst at
BTM-UFJ.
"But it comes down to actions rather than words and if the
European debt crisis keeps rising, there will be less attraction
for China to diversify from dollars into euros," he said.
The euro extended gains against the dollar to a session high
at $1.2342 <EUR=>, up 1.4 percent on the day after the Chinese
comments. By 0750 GMT, the euro was up 1.1 percent at $1.2289.
China has been trying to diversify its currency reserves,
the world's largest that have topped $2.4 trillion, to reduce
the dollar's dominance in favour of the euro and yen to curb
risks.
BARGAIN-HUNTING BOOSTS STOCKS
The MSCI index of world stocks <.MIWD00000PUS> rose 0.8
percent as investors picked up shares beaten down in recent
sessions in a sell-off fuelled by fears Europe's debt crisis
could spark a credit crunch and undermine global economic
recovery.
The pan-European FTSEurofirst 300 index <> rose 0.8
percent, adding to the previous session's rise and tracking
gains in Japan. The index is still down more than 12 percent
from a mid-April peak, on worries about Europe's debt crisis.
The FT report had fed broad risk aversion and hit U.S.
stocks on Wednesday. The Dow Jones industrial average <>
closing below 10,000 for the first time since early February.
"It's mostly a reaction to oversold conditions. Equities are
cheap in most places, other than in the worst affected regions,"
said Bernard McAlinden, investment strategist at NCB
Stockbrokers, in Dublin.
Attractive stock valuations and technically oversold
conditions after a recent selloff prompted selective buying in
Asia, but investors tread cautiously amid persistent concerns
over the economic fallout from the euro-zone's debt woes.
A rise in U.S. stock futures provided an additional boost.
S&P futures <SPc1> climbed 1.7 percent, with some in the market
saying they thought U.S. shares were due a technical rebound.
Gold ticked higher as persistent worry about Europe's debt
crisis attracted buying from investors trying to avoid risk.
Spot gold <XAU=> gained 0.4 percent to $1,214.45 an ounce.
Gold hit a record high of $1,248.95 in mid-May as investors
ditched the euro on fears that euro zone austerity policies
could undermine the global economic recovery.
(Additional reporting by Kevin Yao in Singapore; Brian Gorman
and Neal Armstrong in London, editing by Mike Peacock)
