* MSCI world equity index up 1.5 percent
* Yen bounces off record high of 76.25 per dollar
* European stocks, U.S. stocks higher; oil rises
(Updates U.S. markets; changes dateline)
By Al Yoon
NEW YORK, March 17 (Reuters) - European and U.S. stocks
rebounded from three days of exhaustive selling on Thursday
even as Japan's nuclear power crisis continued, while the yen
traded near a record high against the dollar.
Markets speculated that Japanese investors would sell
overseas assets to bring home funds. The yen hit a record high
against the dollar of 76.25 yen <JPY=> as Asian markets began
trading.
Group of Seven finance leaders and central bankers were to
discuss steps to calm markets later on Thursday, and currency
traders have interpreted some remarks as indicating other
central banks may give Japan their blessing to intervene to
drive the dollar higher against the yen. []
Developments at Japan's quake-hit nuclear plant remained a
main source of worry for investors. Japanese military
helicopters dumped water, and a water canon was used on an
overheating nuclear reactor, but radiation levels at the plant
remained high. For details, see []
"The absence of immediately worse news from Japan is
interpreted by equity traders as a reason to stop selling and
look for buying opportunities," Jim Vogel, an interest rate
strategist at FTN Financial, said in a note.
The MSCI world equity index <.MIWD00000PUS> rose 1.5
percent, after hitting a three-month low earlier in the week.
After hitting 30-month highs in mid-February, the index has now
erased all of this year's gains.
Tokyo stocks ended down 1.4 percent <>, coming off an
intraday low as a more than 14 percent drop since March 10
attracted buyers. Earlier this week, Japanese stocks suffered
their worst two-day selloff since 1987.
The Thomson Reuters global stock index <.TRXFLDGLPU> gained
0.9 percent. The FTSEurofirst 300 index <> rose 1.9
percent as a recent sell-off attracted bargain hunters.
The Dow Jones industrial average <> jumped 159.62
points, or 1.37 percent, to 11,772.92. The Standard & Poor's
500 Index <.SPX> gained 20.15 points, or 1.60 percent, to
1,277.03 and the Nasdaq Composite Index <> climbed 39.61
points, or 1.51 percent, to 2,656.43.
The index known as Wall Street's fear gauge, the VIX,
<.VIX>, fell 13 percent to 25.69 on Thursday, a day after
hitting its highest level since July.
Some traders, however, said there were still reasons to be
cautious.
"The drop has been violent, but the newsflow remains very
alarming," said David Thebault, head of quantitative sales
trading at Global Equities in Paris. "There is short covering
at this point, and we continue to see outflows.
"Stocks might look oversold on the short term, but they are
not if we're heading into a bear market. The Japanese crisis
could have severe consequences for the global economy," he
said.
Emerging market stocks <.MSCIEF> fell 0.3 percent.
U.S. crude oil <CLc1> rose 2.6 percent to $100.50 a barrel
as unrest in Saudi Arabia, Bahrain and Libya heightened supply
disruption concerns and investors weighed the impact on energy
demand from quake-hit Japan.
The state-owned Bahrain Petroleum Co has partly shut down
production due to staff shortages caused by political unrest in
Bahrain, trade sources said. Bahrain arrested at least six
opposition leaders, a day after its crackdown on protests by
the Shi'ite Muslim majority raised fears of a regional
conflict. [][]
INTERVENTION THREAT
In New York, the yen traded at around 78.67 per dollar, off
the earlier record high that traders fear could trigger
intervention by Japan.
Japanese margin traders were cited as one of the main
factors behind the dollar's fall against the yen, as the break
of the yen's prior record high triggered automatic sell
orders.
Traders also said foreign investors were scrambling to get
hold of yen to settle margin calls on bets on Japanese shares,
forcing them to turn to spot currency at times as well as
forwards <JPYF=> and cross-currency swaps <JPYCBS=TKTL>.
Japanese Finance Minister Yoshihiko Noda blamed speculation
for the yen spike and said he was closely watching markets.
The dollar <.DXY> hit a four-month low against a basket of
major currencies. The euro rose 0.75 percent to $1.4005 <EUR=>,
boosted by solid demand at a 4.1 billion euro Spanish bond
auction and on the view euro zone interest rates may rise as
soon as April.
Stabilization in Western stock markets reduced demand for
the safety of U.S. government debt. Benchmark 10-year note
yields rose 0.09 percentage point to 3.29 percent.
Gold <XAU=> rose $5.00 to $1,404.30 an ounce.
(Additional reporting by Blaise Robinson; Editing by Leslie
Adler)
