* MSCI world steadies after biggest 1-day loss in 14 months
* Euro, eurostocks rally on relief at ECB funding operation
* Q2 ends with losses of more than 10 pct, worst since 2008
* Wall St futures point to higher open; US jobs data eyed
By Mike Dolan
LONDON, June 30 (Reuters) - World stocks steadied on
Wednesday after their biggest one-day plunge in over a year,
with European markets bouncing on the last day of the quarter
after European Central Bank funding operations eased nerves.
Fresh banking and sovereign debt stress in Europe and fears
of an austerity-fuelled double-dip into recession for the world
economy have gripped investors again in the final days of June.
MSCI's world equity index <.MIWD00000PUS>, which has lost
more than 10 percent since April and is down more than 7 percent
over the first six months of 2010, held the line after losing
more than three percent on Tuesday.
The global index, which was up 0.1 percent in Europe on
Wednesday, has recorded its worst quarter since the final three
months of 2008 when the demise of Lehman Brothers sent world
markets and the economy into a tailspin.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For graphic on world markets performance in Q2 and H1:
http://graphics.thomsonreuters.com/10/GLB_PRH1.html
For graphic on Reuters June Asset Allocation Poll:
http://graphics.thomsonreuters.com/10/GLB_AAPL0610.gif
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Worries this week that an expiry of some 442 billion euros
of one-year emergency ECB loans would leave many strapped
European banks with severe financing difficulties eased a little
after a replacement 3-month operation saw less of scramble for
funds than feared. []
"It's definitely a good sign and means there is still some
interbank lending occurring within the European money market,
and that's it's not just a vertical relationship between banks
and the ECB," said Gilles Moec, economist at Deutsche Bank.
The ECB said 171 banks borrowed 131.9 billion euros ($161.4
billion) over three months at a flat rate of 1 percent, below
expectations for demand of 210 billion euros.
"The banks are in effect swapping a comfy sofa for a stool
-- but at least there are plenty of stools," said Societe
Generale rate strategist Suki Mann.
The FTSEurofirst 300 index of European stocks <> was
0.3 percent higher on Wednesday, up from a three-week closing
low in the prior session. European banking stocks <.SX7P>
rebounded 1.5 percent. Safe-haven German government bond futures
for September delivery <FGBLc1> retreated 0.02 percent.
ECB relief and slightly higher short-term interest rates due
to the week's net drain of emergency funds helped push the euro
<EUR=> sharply higher. It rallied almost one percent after two
days of steep losses, gaining more than one percent on sterling.
"Any kind of sense that the ECB is in some way going to
leave the market short of liquidity is obviously very far wide
of the mark," said Steve Barrow, strategist at Standard Bank.
MOUNTING NERVES
Looming publication of European bank stress tests next month
have added to the fresh nerves about the sector. The Bundesbank
said on Wednesday that German banks have agreed to participate
in EU-wide stress tests once detailed parameters are published.
"A confluence of events may well cause market anxiety to
culminate today, potentially causing risk aversion to mark at
least a local peak," said Commerzbank rate strategist Christoph
Rieger, adding that Bund option expiries, month-end portfolio
adjustments and U.S. employment data were also likely to weigh.
U.S. June private-sector employment data from ADP is due out
later in the session and the benchmark non-farm payrolls report
is due on Friday. U.S. stock futures <SPc1> pointed to a higher
open on Wall Street later.
Alongside European banking and sovereign debt jitters and the
calendar stresses of the half-year mark, investors are
increasingly fearful for global economic growth after a series
of downbeat reports from the United States and China.
"Markets are very sensitive to any signs that growth is
failing. There have been question marks over the big components
of global growth such as U.S. consumer demand and Chinese demand
... (and) there isn't a lot of good news," said Bernard
McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Risk reduction was fuelled by a report that showed a slump
in U.S. consumer confidence. []
Chinese stocks <> fell 1.2 percent, extending a 4
percent slide on Tuesday to a new 14-month low. Emerging stocks
<.MSCIEF> dropped another 0.5 percent on Wednesday after almost
three percent losses on Tuesday.
Earlier, the MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> dropped another 0.5 percent. Japan's Nikkei
average <> fell 2 percent to a seven-month low after
breaking below a support level.
(Additional reporting by Atul Prakash, Kirsten Donovan and
Kevin Yao; Editing by Sonya Hepinstall)
