* World stocks steady, above Japan disaster levels
* Euro resilient despite Portugal crisis
* Portugal 10-year yield at new euro-era high
* Oil, gold steady, watching MidEast, Libya
By Mike Peacock
LONDON, March 25 (Reuters) - World stocks held firm on
Friday, focusing on a buoyant economic and company backdrop,
while the euro shrugged off fresh ratings downgrades for
Portugal, which is in the grip of a political and debt crisis.
Europe's single currency wobbled after Standard & Poor's
followed Fitch in cutting Lisbon's credit rating by two notches
and warned of worse to come. But it soon found its feet.
[]
"The market is treating many of these downgrades as
rearguard actions which are already well discounted and the
dollar is under pressure broadly," said Todd Elmer, currency
strategist at Citi in Singapore.
The euro also got a nudge higher after the closely-watched
Ifo survey showed German business sentiment fell less than
expected, holding at very strong levels.
President Anibal Cavaco Silva will meet the leaders of
Portugal's political parties on Friday to decide whether to call
a snap election after the prime minister resigned once his
latest austerity measures, aimed at avoiding a bailout, were
thrown out in parliament. []
Portugal's borrowing costs could not escape the fallout.
The yield on 10-year Portuguese government bonds rose to a
new euro-era high above 8 percent, well above the level which
the government says is sustainable, and the premium to hold its
10-year debt rather than Germany's widened to 474 basis points.
Stock markets have remained buoyant despite Japan's
catastrophes, turmoil in the Middle East and North Africa and
the euro zone debt crisis roaring back into life.
The MSCI All-Country index <.MIW0000PUS> was flat at 339.97.
Having rallied for several successive trading days, it is now
higher than when Japan's earthquake and tsunami struck.
European shares were marginally higher <> as bullish
macroeconomic and company signals vied for attention with
concerns over the euro zone sovereign debt situation and
violence in Libya.
"We have got the European issue ... and clearly the events
in the Middle East are still a tail risk for the markets to deal
with," said Ian Richards, European equity strategist at RBS.
"But... the global economy is in a pretty good shape and we
have valuations which are reasonable to low in the equity
market. We are bullish on markets and think that we will make
progress from here."
The euro <EUR=> rose to around rose to around $1.4166 after
the Ifo report, rebounding from a low around $1.4050 after S&P's
ratings cut.
With Portugal seen as an inevitable candidate for a bailout,
a decision by European leaders to increase their financial
rescue fund to its full 440 billion euros only by June could
rattle investors. []
But with the European Central Bank expected to raise
interest rates next month, boosting its yield advantage over the
dollar, the single currency should be well underpinned.
The yen traded near 81 per dollar <JPY=>, a level it has
clung tightly to all week since a rare coordinated intervention
by leading central banks to curb its appreciation last Friday.
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FX COLUMN-Return of the yen carry trade []
Insider TV-Chart view: http://link.reuters.com/suv68r
Reuters polls on world stock markets: []
European sovereign debt crisis: http://r.reuters.com/hyb65p
Japan disaster in figures: http://r.reuters.com/ser58r
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OIL, GOLD PREY TO MIDEAST
Brent crude was steady near $116 ahead of protests planned
in Yemen and Bahrain, heading for a third straight weekly gain
and up 1.4 percent since western powers last weekend launched a
military campaign in Libya. []
"So long as ongoing problems in the Middle East continue to
elevate risks of a further supply disruption, there is a strong
likelihood of a price spike in the second quarter as the market
demands additional oil to meet summer demand," said J.P. Morgan
analysts headed by Lawrence Eagles.
Spot gold held steady below the previous session's record
highs, as worries over euro zone's debt crisis and Middle East
turmoil supported sentiment. []
Japan's Nikkei share index <> rose 1.1 percent,
rounding off a week of gains as foreign investors scooped up
battered shares.
The index is down 7 percent from its close on March 11, when
a massive earthquake and tsunami struck northeastern Japan. []
Foreign investors bought a net 891 billion yen ($11 billion)
of Japanese stocks last week, capital flows data from Japan's
Ministry of Finance showed on Friday, the highest weekly total
recorded in the data that goes back to 2005.
(Editing by Toby Chopra)
