(Updates with Wall Street outlook, fresh prices)
By Natsuko Waki
LONDON, May 12 (Reuters) - World stocks rose on Monday,
supported by better-than-expected first-quarter results from
HSBC <HSBA.L> which eased concerns about the banking sector,
while the dollar firmed towards last week's two-month peak.
Major financial markets were calm after China's southwest
province of Sichuan was hit by a strong earthquake, felt across
much of China and as far west as Bangkok.
Shanghai stocks fell around 1 percent before closing up on
the day, while the yuan <CNY1MNDFOR=> slipped in offshore
non-deliverable forwards against the U.S. dollar.
A firmer dollar tamed recent rallies in energy and commodity
prices, with oil falling from last week's record high and gold
slipping.
HSBC took bad debt charges related to its U.S. consumer
finance business of $3.2 billion, much smaller than expected. It
also said first-quarter profits were higher than the same period
last year as growth in Asia and elsewhere helped counter a hit
from its exposure to U.S. home loans.
HSBC's announcement has added to growing investor
expectations that banks are making efforts to clean up their
balance sheets hit by the nine-month-old credit crisis and that
the worst of the financial turmoil may have passed.
"There are signs that the financial market crisis is easing.
Financial institutions are starting to offload bad loans and
recapitalise," said Christine Li, European economist at Moody's
research arm Economy.com.
However, she added: "The worst of the crisis might be over,
but the pain to the real economy and the corporate sector could
still lie ahead."
The FTSEurofirst 300 index <> was up half a percent
while MSCI main world equity index <.MIWD00000PUS> rose 0.2
percent, edging closer to last week's four-month peak.
Sterling <GBP=> rose 0.2 percent against the dollar after
HSBC's results and data showing record UK producer inflation,
which clouded expectations for an interest rate cut next month.
STILL COSTLY OIL HELPS STOCKS
Oil and gas firms <.SXEP> were the best performers in Europe
as oil prices -- even though they fell on Monday -- stayed near
record peaks.
The high price of oil is a double-edged sword for stocks as
it boosts revenues of oil firms but increases inflationary
pressures, which erode corporate profits in general.
U.S. stock futures were up around 0.2 percent <SPc1>,
indicating a firmer open on Wall Street.
Societe Generale noted U.S. equity markets saw a big
improvement on earnings per share momentum, with upgrades
outnumbering downgrades over the last four weeks.
The main strength came from mining, metals, oil, industrials
and pharmaceuticals.
MBIA <MBI.N>, the world's largest bond insurer, posted a
loss of $2.41 billion in the first quarter due to unrealised
losses on insured derivatives. MBIA has raised more than $2.5
billion of capital from investors to help offset losses from its
exposure to credit derivatives.
The dollar <.DXY> rose 0.1 percent against major currencies,
helped by expectations that the Federal Reserve may soon end its
campaign since last September to cut interest rates to shore up
the economy.
The iTraxx Crossover index <ITCRS5EA=GFI>, most-widely
watched indicator for European credit market sentiment,
tightened by 6 basis points to 450 bps.
Emerging sovereign spreads <11EMJ> tightened 2 bps while
emerging stocks <.MSCIEF> rose 0.1 percent.
The June Bund future <FGBLM8> was down 0.2 percent as
safe-haven flows abated in the face of firmer stocks.
U.S. light crude <CLc1> was down 0.6 percent at $125.20 a
barrel after setting all-time peaks above $126 on Friday.
Gold <XAU=> also slipped to $882.50 an ounce.
(Editing by David Christian-Edwards)
