* European stocks follow Asia's lead higher
* Oil retreats from record high
* Dollar climbs broadly, eyes on G8 meeting
* FTSEurofirst 300 <> up 0.5 pct at 1,169.35
By Ian Chua
LONDON, July 7 (Reuters) - Stock markets from Britain to
China rose on Monday as cautious investors hunted for bargains
after recent steep declines, while oil prices retreated from
last week's record high.
Investors were keeping an eye on the three-day meeting of
leaders of the Group of Eight rich countries to see if they send
a message strong enough to reverse the course of record high oil
prices and the dollar's long-term slide.
Mounting expectations the European Central Bank will not
follow up with another interest rate rise after last week's
well-flagged 25 basis point move to 4.25 percent also undermined
the euro, which fell to a one-week low versus the dollar.
U.S. crude <CLc1> was at $143.59, down from last week's
all-time high of $145.85 per barrel. The New York Mercantile
Exchange did not issue an official Friday closing price due to
the U.S. Independence Day holiday.
"Fundamentally the deteriorating economic outlook still
makes for a difficult environment for equities short term, but
clearly there is enough valuation support (for) a short
term-rally," said Darren Winder, head of macro and strategy
research at Cazenove in London.
The FTSEurofirst 300 <> index of top European shares
rose 0.5 percent in morning trade, with Germany's DAX <>
gaining 0.9 percent and London's FTSE <> climbing 0.4
percent. The FTSEurofirst 300 index is still down more than 20
percent this year.
Earlier, Japan's Nikkei <> rose nearly 1 percent,
breaking its longest losing streak in more than half a century,
while MSCI's measure of other Asian stock markets
<.MIAPJ0000PUS> gained 0.4 percent.
China's main stock index surged more than 4 percent as funds
bought a wide range of blue chips on the view that the market
has finally found at least a short-term floor.
MSCI world equity index <.MIWD00000PUS> edged up 0.1
percent, steadying after four straight sessions of declines.
Despite the gains in equities, persistent concerns about the
health of the financial sector, which is facing a global credit
crunch, gave safe-haven government bonds a bid tone, pushing
yields lower.
The 10-year Bund yield <EU10YT=RR> slipped 2 basis points to
4.476 percent, while the U.S. benchmark 10-year notes
<US10YT=RR> yielded 3.96 percent, down from about 3.98 percent
in U.S. trade on Thursday.
DOLLAR UP AS G8 MEETS
The dollar rose 0.5 percent versus a basket of major
currencies, extending last Friday's gains after last week's key
U.S. employment data was not as bad as some had feared.
"If at all, comments from the G8 should be a bit dollar
supportive as the focus of the market is very much on energy
prices and the impact on inflation," Michael Klawitter, FX
strategist, Dresdner Kleinwort, Frankfurt.
"A stable dollar would be one of the preconditions to
stabilise the oil price (and) there is some expectation that the
statement ... should hint at least at some general agreement
that the dollar should not be allowed to weaken further."
Gold <XAU=>, hit by the stronger dollar, fell to $920.15 an
ounce from $932.00 in London on Friday.
(Additional reporting by Rebekah Curtis and Toni Vorobyova;
Editing by Gerrard Raven)
