* World equities recover, helped by solid company results
* Greek, U.S. debt woes weigh; European yields rise
* China warns on inflation dangers, forex reserves
* Gold hits record high; oil falls
(Updates market action, changes dateline, previous London)
By Richard Leong
NEW YORK, April 19 (Reuters) - World stocks rebounded on
Tuesday from the prior day's losses, but debt woes on both
sides of the Atlantic and new signals from China on inflation
dangers weighed on markets.
Greece sold 1.6 billion euros of three-month debt, but was
forced to pay more than 4 percent, underlining growing unease
in the market over a potential debt restructuring that could
further strain the euro zone.
Gold <XAU=> hit a record high near $1,500 an ounce, while
oil in London <LCOc1> fell $2 to $119.67 a barrel.
Investors dipped their toes back into stocks and other risk
assets in part on solid company results.
"It is kind of nice to see a couple of big headline
companies come in with positive surprises after a string of
headline companies delivering negative surprises over the last
week," said Fred Dickson, chief market strategist at D.A.
Davidson & Co. in Lake Oswego, Oregon.
Wall Street <> <.SPX> <> opened 0.2 percent higher
after Goldman Sachs <GS.N> posted a smaller-than-expected fall
in profits and Johnson & Johnson <JNJ.N> reported unexpectedly
strong earnings. It fell more than 1 percent on Monday on
worries about sovereign debt in both Europe and the United
States. See []
European stocks <> climbed 0.78 percent, recovering
from Monday's 2 percent drop after above-consensus results from
LVMH <LVMH.PA> and Burberry <BRBY.L>.
Japan's Nikkei <> closed down nearly 1.3 percent in
the wake of the prior day's losses in the U.S. and Europe.
Debt rating agency Standard & Poor's rattled investor
confidence on Monday when it changed its outlook on the United
States to negative from stable, threatening the future of its
prized AAA credit rating.
The dollar slipped 0.3 percent against a basket of major
currencies <.DXY> after making headway on Monday. Its gains on
Monday were due to a rush for safe havens despite the risk of
S&P downgrading U.S. debt in two years if Washington fails to
achieve a budget plan that relies less on debt.
S&P's warning intensified scrutiny on the huge U.S. budget
deficit and the political fight to slash it. The deficit is a
key element in the global imbalances that currently worry many
investors and policymakers.
There was no direct reaction to the S&P move on Tuesday
from Beijing, which holds vast reserves of U.S. Treasuries,
though the head of China's central bank said the country should
diversify investments as its some $3 trillion of foreign
exchange holdings had grown too large.
Another Chinese ratesetter said inflation pressures gave
further scope for a rise in banks' reserve requirements
following seven hikes -- together with four increases in
benchmark interest rates -- since last October.
"Discussions on the U.S. losing its AAA-status have been
active for two years, if not longer. S&P's move might have been
a jolt, but should not really be a true surprise," said David
Watt, senior currency strategist at RBC Dominion Securities.
EURO STABILIZES
The euro recovered somewhat from the previous day's
sell-off, as the region's debt problems remained in focus.
The single currency edged up to $1.4298 <EUR=>. Overall, it
has pulled back sharply, having hovered at a 15-month high
around $1.4520 for the past week. See []
"The European debt crisis is in the market's focus again,
and people are concerned there is no lasting solution.
Meanwhile, even negative news in the U.S. isn't putting too
much pressure on the dollar anymore," said Lutz Karpowitz,
currency analyst at Commerzbank in Frankfurt.
Worries over the cost to bailout peripheral countries
exerted pressure on the European debt market, lagging U.S.
Treasuries. Ten-year Greek bond yields <GR10YT=TWEB> were last
up 17 bps at a euro-era high of 14.818 percent, while German
Bund futures <FGBLc1> fell 0.4 percent at 121.99.
Benchmark U.S. 10-year note yield <US10YT=RR> held steady
at 3.38 percent, its lowest in about 2-1/2 weeks.
(Additional reporting by Chuck Mikolajczak in New York;
Jeremy Gaunt, Naomi Tajitsu, Joanne Frearson, William James in
London, Editing by Chizu Nomiyama)
