* Chinese stocks rebound 4.5 pct, lifting others
* Japan up 1.8 pct, Europe 1.3 percent
* Wall Street set for higher open
* Dollar slightly higher, yen slips
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 20 (Reuters) - Chinese stocks rebounded sharply
on Thursday, giving a fillip to global equities and fostering
demand on foreign exchanges for higher-yielding currencies.
Wall Street looked set to open higher, following gains
overnight that managed to shake off fears of a Chinese stock
collapse after a surprising drop in crude oil stockpiles
suggested an improving demand outlook.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.7
percent with more than 1 percent gains in emerging markets
<.MSCIEF>, Europe and Japan.
"Markets are often dictated by state of mind, and one can't
help but sense the growing feeling of optimism," said Brian
Myers analyst at ODL Securities.
"Whilst economic data suggests that we are not out of the
woods just yet, we are certainly walking with a bit more of a
spring in our steps."
China has been a big worry in volume-thin August for
investors, registering large losses that have seen the Shanghai
Composite Index <> swing wildly and even drop into bear
market territory, 20 percent below its recent peak.
The index gained 4.5 percent on Thursday for its second
largest gain this year.
The rebound nudged the index just above the closely watched
five-day moving average, now at 2,905 points. Analysts said a
convincing move above that level could indicate the index had
stabilised after the recent sell-off.
The more immediate impact, along with Wall Street's gains,
was to spread some comfort across other bourses.
Japan's Nikkei average <> climbed 1.8 percent to bounce
back from a three-week closing low. The pan-European
FTSEurofirst 300 <> gained 1.3 percent.
HIGH YIELD
Japan's yen slipped, while higher-yielding currencies crept
up as the recovery in global shares prices stoked some risk
appetite in thin trade.
The yen tends to flourish when demand for higher-risk assets
falls.
"We had a comeback in equities in Asia overnight ... that
has eased some of the tensions that have seen the yen in
particular do well," said Chris Gothard, currency strategist at
Brown Brothers Harriman in London.
The dollar rose close to a quarter of a percent to 94.25 yen
<JPY=>. The euro was flat at $1.4222 <EUR=>
Euro zone government bond prices were flat. The two-year
yield <EU2YT=RR> was 1.294 percent and the 10-year <EU10YT=RR>
to 3.256 percent.
(Additional reporting by Atul Prakash and Naomi Tajitsu,
editing by Mike Peacock)
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