By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 17 (Reuters) - Equities rebounded in Europe and
Asia on Thursday after their recent hammering, while investors
awaited comments on the state of the deteriorating U.S. economy
from Federal Reserve Chairman Ben Bernanke later in the session.
The euro suffered further falls against the dollar on
concerns that the U.S. downturn was spreading to the 15-nation
euro zone economy.
"Investors are jittery," said Norihiro Fujito, general
manager of investment research and information at Mitsubishi UFJ
Securities.
Bernanke was to speak before the U.S. Congress' House Budget
Committee at 1500 GMT with investors keen to glean more insight
into the outlook for the world's largest economy.
The Fed chairman indicated last week that the Fed was ready
to cut interest rates aggressively to support growth.
This reinforced expectations for a half-point cut in the
benchmark federal funds rate from 4.25 percent at the Fed's
policy meeting on Jan. 29-30.
Markets are also wondering if there may be even more to
come, including a fiscal stimulas package from the White House.
"If (Bernanke) proves to be very supportive of some sort of
action it could possibly help stocks and the dollar as well,"
Bear Stearns said in a research note.
The focus was also on company earnings, particularly the
credit-hit banking sector with Merrill Lynch <MER.N> due to
report its fourth quarter results before Wall Street opens.
Economic worries have battered stocks so far this year,
sending MSCI's main world stock index <.MIWD00000PUS> down more
than 7 percent.
But equity investors were more buoyant on Thursday. The
pan-European FTSEurofirst 300 index <> was up 0.9 percent,
recovering most of the previous day's losses. The index hit a
16-month low on Wednesday on fears of a U.S. recession.
Earlier, Japan's benchmark Nikkei average rose 2.1 percent,
gaining for the first time in five sessions. It ended the
session up 2.1 percent at 13,783.45, and the broader TOPIX index
<> was up 2.2 percent at 1,330.44.
DOLLAR, BONDS
The euro slid to two-week lows versus the dollar after
selling off sharply the previous day when comments from a euro
zone policymaker fuelled fears that U.S. economic weakness may
be spreading to Europe.
The euro fell as low as $1.4589 <EUR=>, before recovering a
little to $1.4606 by 0839 GMT, still down a third of a percent.
It fell more than one percent on Wednesday.
The dollar also recovered from this week's 2-1/2 year
troughs versus the Japanese yen, edging up 0.1 percent on the
day to 107.62 yen <JPY=>.
But analysts said the dollar would probably struggle to
progress much further due to the expectations for at least a
half percentage point U.S. interest rate cut.
Euro zone government bonds slid.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR>
was up 2.7 basis points at 3.589 percent. The 10-year Bund yield
<EU10YT=RR> was up 2.5 basis points at 3.998.
