* MSCI world equity index up more than 1.0 percent
* Yen retreats from record high of 76.25 per dollar
* European stocks, U.S. stocks higher; oil rises
(Updates prices)
By Al Yoon
NEW YORK, March 17 (Reuters) - European and U.S. stocks
rebounded from three days of selling on Thursday, despite the
ongoing nuclear plant crisis in Japan, while the yen traded
near a record high against the U.S. dollar.
Markets speculated that Japanese investors would sell
overseas assets to bring home funds to pay for reconstruction
after last Friday's earthquake and tsunami. As a result the yen
hit a record high against the dollar of 76.25 yen <JPY=> as
Asian markets began trading early Thursday.
The Group of Seven finance leaders and central bankers are
expected to discuss steps to calm markets later on Thursday,
and currency traders have interpreted remarks by some officials
as indicating other central banks may give Japan their blessing
to intervene to drive the yen lower against the dollar.
[]
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 in Memphis, Tennessee, said in a
note to customers.
However, the MSCI world equity index <.MIWD00000PUS> was
up 1.2 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 <> earlier
Thursday, 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
0.8 percent. The FTSEurofirst 300 index <> rose 1.8
percent as a recent sell-off attracted bargain hunters.
The Dow Jones industrial average <> rose 146.00 points,
or 1.26 percent, to 11,759.30. The Standard & Poor's 500 Index
<.SPX> climbed 17.72 points, or 1.41 percent, to 1,274.60 and
the Nasdaq Composite Index <> increased 35.11 points, or
1.34 percent, at 2,651.93.
The index known as Wall Street's fear gauge, the VIX,
<.VIX>, fell 10 percent to 26.35 on Thursday, a day after
hitting its highest level since July.
Many traders, however, said there were still reasons to be
cautious as Japan had yet to contain its nuclear problem that
could exacerbate the natural disaster's economic toll.
"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 0.45 percent.
U.S. crude oil <CLc1> rose 3.5 percent to $101.37 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 79.25 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 0.87 percent to $1.4022 <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 0.05 percentage point to 3.25 percent.
Gold <XAU=> rose $3.90 to $1,403.20 an ounce.
(Additional reporting by Blaise Robinson)
