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GLOBAL MARKETS-European stocks rise, oil hits 2009 high

Published 05/12/2009, 04:39 AM
Updated 05/12/2009, 04:48 AM

* MSCI world equity index down 0.1 percent at 238.60

* European stocks gain, oil hits 6-month high

* Dollar, yen fall; government bonds slip

By Natsuko Waki

LONDON, May 12 (Reuters) - European stocks edged higher while world stocks came off an earlier low and oil hit its highest level in almost six months on Tuesday as expectations grew the worst might be over for the global economy.

Energy stocks led the gains in Europe a day after leading central bankers said the economy is about to turn the corner with world stocks racing to their highest since November on Monday.

Data showing bigger-than-expected falls in China's exports and India's industrial output had initially made investors cautious about buying into a near 40-percent rally in world stocks since March, prompting consolidation in Asian stocks.

But "in the bigger picture, not much has changed. The green shoots still have roots," said Maurice Pomery, managing director of Strategic Alpha in London. MSCI world equity index fell 0.1 percent after hitting a six-month high on Monday.

But the index is now up 4.6 percent since the start of the year, thanks to a record monthly gain of more than 11 percent in April.

"We needed to pinch ourselves -- we had a massive rally in the last two months, but the economy is more like an oil tanker, it takes time to turn around," said David Buik, senior partner at BGC Partners.

The FTSEurofirst 300 index rose 0.5 percent, erasing early losses. Emerging stocks fell 0.5 percent.

Leading central bankers, including European Central Bank President Jean-Claude Trichet, said on Monday growth has already picked up in some countries and authorities should have exit strategies to avoid inflation risks after embarking on unorthodox easing policies.

U.S. crude oil rose 0.6 percent to levels above $59 a barrel, its highest since November.

The June bund futures fell 14 ticks.

The dollar fell 0.5 percent against a basket of major currencies while the low-yielding yen fell 0.2 percent to 97.62 per dollar.

"The market has come to a turning point in terms of both technical moves and fundamentals. Stocks and cross/yen have risen helped by a view that the economic deterioration is slowing," said Jun Kato, deputy general manager at Shinkin Central Bank in Tokyo.

"But fundamentals per se are still weak, so the market is expected to show more vulnerability to the weak side of the economy as it has excessively priced in the positive side of it." (Additional reporting by Simon Falush; Editing by Ruth Pitchford)

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