(Updates throughout, adds Wall Street outlook)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 18 (Reuters) - Global stocks rose and Wall
Street looked set for a positive opening on Monday as early
worries about stronger oil and a weaker dollar diminished.
European shares were firmer with the FTSEurofirst 300
<> index of top European shares up 0.5 percent having
earlier been in negative territory.
"The stock market is looking for direction, and it is
looking towards currencies and commodities as it has become more
quiet on the macro and earnings front," said Markus Steinbeis,
head of European equities at Pioneer Investments in Munich.
The initial fall on European stock markets reflected concern
that the dollar was starting to weaken again and the oil price
was rising.
Oil rose well above $115 a barrel earlier in the day as
Tropical storm Fay was seen threatening production and supply in
the Gulf of Mexico.
But it later fell back to trade <CLc1> around $113.75 a
barrel.
"Oil was strong earlier because of the storm," said
Christopher Bellew, broker at Bache Financial. "If the storm
proves not to be so serious to the oil industry then it's quite
likely we'll see the market continue to retreat," he said.
Oil's fall to a more than 3-month low of $111.34 on Friday
has helped ease market concerns about inflation.
Equities were generally higher. MSCI's main gauge of world
stocks <.MIWD00000PUS> was up about a quarter of a percent while
its emerging market index <.MSCIEF> gained a half a percent.
Earlier, Japan's Nikkei average <> rose 1.1 percent as
exporters gained on recent yen softness.
"There has been a tug-of-war between negative fundamentals
such as the economic slowdown and positive factors for corporate
earnings such as a softer yen and fall in oil prices," said
Yukio Takahashi, market analyst at Shinko Securities.
The benchmark ended up 146.04 points at 13,165.45. The
broader Topix <> climbed 1.3 percent to 1,263.75.
DOLLAR WOBBLE
The dollar eased from a six-month high against the euro as
the initial recovery in oil and commodity prices spurred
investors to take profits on the U.S. currency's dramatic rally.
"The dollar seemed to overshoot the macro adjustments last
week... with the massive liquidation in the commodity markets.
But we're seeing some signs of stability there and second
thoughts about how far oil will fall is allowing the dollar to
take a breather," ING head of FX research Chris Turner said.
The euro fell to a six-month low of $1.4645 on trading
platform EBS in early Asian trade before recovering to $1.4712
<EUR=>, up 0.1 percent from late Friday U.S. trade.
It has tumbled nearly six percent against the dollar in two
weeks due to increasing investor concern that the slowdown in
the U.S. economy will be replicated in Europe and globally.
The dollar index, which measures the dollar's value against
a basket of six currencies, eased 0.1 percent to 77.046 <.DXY>
from a seven-month high of 77.268 reached on Friday.
Two-year euro zone government bonds yielded a flat 3.990
percent <EU2YT=RR> while 10-year yields were flat near
three-month lows at 4.136 percent <EU10YT=RR>.
