* MSCI world equity index at 9-month high
* Bernanke to testify
* Dollar stabilises after fall; oil rises
By Natsuko Waki
LONDON, July 21 (Reuters) - World stocks hit a 9-month high
on Tuesday and emerging market debt spreads with U.S. Treasuries
were the narrowest in 10 months as investors anticipated upward
surprises from earnings results.
Wall Street looked set for a positive start a day after the
S&P 500 index hit an eight-month closing high after troubled
lender CIT <CIT.N> reached a deal with bondholders for $3
billion in emergency financing, according to a source familiar
with the situation.
Ahead of twice-yearly testimony to Congress later in the
day, Federal Reserve Chairman Ben Bernanke offered reassurance
that loose monetary policy with near-zero interest rates would
be around for a while longer in an article in the Wall Street
Journal.
With general improvement in risk appetite, investors are
looking to more corporate earnings results from firms. Coca-Cola
Co <KO.N> reported a better-than-expected quarterly profit, the
latest in a series of positive surprises.
Dupont posted a 61 percent drop in quarterly profit, hurt by
weak global demand, but cost cuts helped the chemical maker beat
Wall Street forecasts.
"The general sense as results season is upon us is that there
will be fewer negative surprises than in 2008... it will be
comfortable which is helping increase risk appetite," said
Jeremy Batstone Carr, equity strategist at Charles Stanley.
MSCI world equity index <.MIWD00000PUS> rose 0.4 percent,
approaching the high set last month, which was a level last seen
in October.
The FTSEurofirst 300 index <> rose 0.7 percent,
slipping past a June 11 high to stand at its highest since
October last year.
Emerging sovereign debt spreads <11EMJ> narrowed to touch
400 basis points over U.S. Treasuries for the first time in 10
months before widening to 401 bps, 4 bps tighter from the
previous close.
Emerging shares <.MSCIEF> were also hovering at 10-month
highs, a level they reached on Monday.
"We've had better earnings, better economic data and risk
appetite is up -- this is the story driving the market at the
moment," said James Hughes, analyst at CMC Markets.
According to Thomson Reuters data, the second-quarter
earnings growth rate for the S&P 500 improved to -35.2 percent
as of end last week from -35.7 percent, thanks largely to
better-than-expected earnings from companies in the financial
sector.
However, all sectors in the S&P 500 are expecting a
year-over-year decline in earnings with the materials, energy,
financials and industrials anticipating the lowest earnings
growth rates for the quarter.
U.S. crude oil <CLc1> rose 86 cents to $64.847 a barrel.
The dollar <.DXY> was at a seven-week low against a basket
of major currencies while the euro fell 0.3 percent to $1.4221
<EUR=> after hitting a six-week high on Monday.
Bernanke will start his twice-yearly testimony on the
economic outlook and monetary policy before the House Financial
Services Committee at 1400 GMT. Analysts say Bernanke was likely
to make clear again that there is no rush to tighten.
"Whilst there are obvious signs that the economic data is
improving or at least showing signs of bottoming out, recent
rhetoric from the Fed has remained dovish," Calyon said in a
note to clients.
"Bernanke should reiterate that the slack in the economy
will keep the inflation outlook subdued."
(Additional reporting by Simon Falush and Jessica Mortimer;
editing by Stephen Nisbet)
