GLOBAL MARKETS-World shares recoup all of Japan disaster losses

Published 03/24/2011, 08:51 AM
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* MSCI world index up, higher than before Japan disasters

* Portugal bailout likely after PM resigns, yields soar

* Euro wobbles, then heads higher

* Oil eases 0.2-0.3 percent, gold steady near record

(Updates lead, refreshes prices, adds comment)

By Amanda Cooper

LONDON, March 24 (Reuters) - World stocks rose for a sixth day on Thursday and are now higher than when Japan's earthquake and tsunami struck, while Portugal's borrowing costs soared after its premier quit, making a bailout ever more likely.

Portugal's crisis had knocked the euro but it recovered early losses to trade a touch higher, a day after its biggest one-day fall in six weeks. [FRX/]

The single European currency was still set for its largest weekly slide in a month after the Portuguese parliament rejected a series of austerity measures and Prime Minister Jose Socrates stepped down.

Equity markets were not affected, however, rallying after gains in the heavyweight mining sector offset losses elsewhere.

"Sentiment is still relatively good. The cycle is good. We are still mildly optimistic on the overall picture," said Joost de Graff, senior portfolio manager at Kempen Capital Manageent in the Netherlands.

Surveys on Thursday showed economic recovery continued in March, shrugging off Japan's disaster, although Middle East turmoil is pushing prices higher. [ID:nLDE72N0KH]

The MSCI All-Country index <.MIW0000PUS> was last up 0.4 percent, having rallied for six successive trading days, its longest stretch of gains since September 2010.

Brent crude recovered earlier losses to trade largely unchanged on the day at $115.54 a barrel, remaining pressed by concern over instability in the Middle East. [O/R]

Middle East tension "although disquieting is not a game changer," said Jeremy Batstone-Carr, strategist at Charles Stanley. "The consensus on Japan is that rebuilding will be supportive for the Japanese economy in the medium term, and estimates of global growth rates don't need adjusting too much."


European sovereign debt crisis: http://r.reuters.com/hyb65p

Q+A-What's next for Portugal? [ID:nLDE72N00Q]

Yen intervention: http://link.reuters.com/sub68r

Japan earthquake in graphics http://r.reuters.com/fyh58r

U.S. crude futures chart: http://link.reuters.com/maq68r


EU BAILOUT

The premium investors demand to hold Portuguese debt rather than benchmark German Bunds hit euro-lifetime highs, while the premium to hold other peripheral debt also rose, reflecting the growing preference among bondholders to own higher-rated paper.

Socrates and other Portuguese politicians continue to hold out against the need for a financial bailout and are not expected to ask for one at an EU leaders' summit on Thursday and Friday, an EU source said. [ID:nLDE72N0VV]

Much of the anxiety over the euro zone's debt problems had been soothed by the prospect of a longer-term reinforcement of the EU bailout fund being agreed at the summit.

But this has now been delayed until June, while Portugal faces what are viewed as unsustainable borrowing costs ahead of multi-billion euro bond repayments in April and June.

The yield on 10-year Portuguese debt reached 7.9 percent, leaving the premium to German government bonds around euro-lifetime highs of 465 basis points.

The euro was last up 0.4 percent against the dollar at $1.4145, having fallen earlier to a low of $1.4049.

The yen itself was steady against the dollar at 80.90 yen , although market players are still wary Japan may intervene to sell the currency if the dollar breaches 80 yen.

"The euro is becoming increasingly immune to issues affecting the euro zone but the markets may be getting too blase about the risks," said Jane Foley, senior currency strategist at Rabobank.

European shares hit two-week highs, led by gains in the shares of two major British retailers, although with no end to the euro zone crisis in sight, investors were cautious. [.EU]

After a downgrade for 30 Spanish banks by Moody's helped drive losses on opening, the FTSEurofirst 300 <.FTEU3> recovered to rise 0.8 percent at 1,122.09 points, while S&P 500 futures rose 0.8 percent, pointing to a strong start on Wall Street. [.EU] [.N]

Spot gold rose 0.2 percent to $1,438.45 an ounce, just shy of a record $1,444.40 set earlier in the month. [GOL/]

(Additional reporting by Kirsten Donovan and Harpreet Bhal in London; reporting by Amanda Cooper; editing by Patrick Graham)

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