* MSCI world equity index up 0.1 pct, U.S. closed
* Dollar briefly hits two month high
* German debt falls on concerns over bailout costs
By Jeremy Gaunt, European Investment Correspondent
LONDON, Nov 25 (Reuters) - Financial markets regained some
composure on Thursday after roller-coaster sessions prompted by
the euro zone's debt problems as recent upbeat economic data
encouraged investors to put on some risk.
Risk appetite improved slightly on the back of solid
overnight gains on Wall Street, but there would be no follow
though from that quarter as U.S. markets were closed for the
Thanksgiving holiday.
World stocks as measured by MSCI <.MIWD00000PUS> were up
slightly, with Europe and Japan higher.
"The most important thing for the equity market is the
ability to believe that the economic cycle is staying intact,"
Philip Isherwood, European equities strategist at Evolution
Securities, said. "That means not just U.S. data reassuring, but
also European."
German government bonds <FGBLc1> fell, pressured by the
financial implications for core issuers of potential further
euro zone bailouts and by recent data highlighting the strength
of the region's largest economy.
"The next step could be that core Europe will take
significantly more responsibility for the rest of Europe," RBC
rate strategist Peter Schaffrik said.
Investors have also begun considering whether German plans
to include Collective Action Clauses (CACs) in euro zone
sovereign debt issues will require more risk priced in generally
for such bonds.
Yield spreads on Spanish and Portuguese bonds -- watched for
signs they will be the next dominoes to topple in Europe's
crisis -- widened by 10 basis points over German Bunds.
In currency markets, the dollar briefly hit a two-month high
against a basket of major currencies <.DXY> before reversing
gains. The euro was up 0.3 percent at $1.3367 <EUR=>.
"Things are a bit sidelined due to the U.S. holiday but
there is still a lot of nervousness about euro zone peripheral
debt problems. So the euro remains a sell into rallies and not a
buy on dips", said Paul Mackel, HSBC's director of currency
strategy.
MIXED STOCKS
World stock markets were generally steady because of the
U.S. hiatus with MSCI's all country world index up 0.1 percent
and its emerging market counterpart gaining a quarter percent.
Europe's FTSEurofirst 300 <> rose about 0.6 percent.
Japan's Nikkei <> closed up 0.5 percent.
Koen De Leus, strategist at KBC Securities, said the
European market was getting some support from recent strong
economic data, including on consumer spending, joblessness and
and consumer confidence.
French consumer confidence was the latest sentiment
indicator to beat forecasts in Europe on Thursday, following a
strong reading from Germany's closely watched Ifo survey a day
earlier.
"Markets are on a rollercoaster. Despair on the ride down
due to the day-by-day increasing debt contagion in Europe is
occasionally relieved by better-than-expected macro data from
Europe and the U.S. It's a delicate balance," De Leus said.
(Additional reporting by Joanne Frearson and Kirsten Donovan,
editing by Mike Peacock)
