Global shares recoup all of Japan disaster losses

Reuters News
|
Posted: Mar 24, 2011 8:29 AM
Global shares recoup all of Japan disaster losses

By Amanda Cooper

LONDON (Reuters) - Global stocks rose for a sixth day on Thursday and are now higher than when Japan's earthquake and tsunami struck, buoyed by confidence that the world economic recovery remains on track.

The euro also recovered early losses to trade a touch higher, a day after its biggest one-day fall in six weeks, despite negative signs from banking and politics in Portugal and Spain, the two countries now at the center of Europe's continuing debt crisis.

The single European currency was 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, although equity markets rallied 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 Management in the Netherlands.

Surveys on Thursday showed economic recovery continued in March, shrugging off Japan's disaster, although Middle East tensions are sending prices rocketing and the impact of public sector cutbacks in Europe is a risk.

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.

EU BAILOUT

Portugal is unlikely to ask the European Union for a financial bailout during an EU leaders' summit on Thursday and Friday, but it cannot be ruled out, an EU source said on Thursday.

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 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.

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

Euro zone government bonds were flat, with Bunds having pared some of their earlier gains to trade at 3.250 percent, while Portuguese 10-year yields rose 7 basis points to 7.895 percent, leaving the premium to Bunds around euro-lifetime highs of 465 basis points.

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. <.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.

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