* MSCI world equity index <.MIWD00000PUS> up 0.5 pct
* Index eyes strongest quarterly gain since 1988 launch
* Oil <CLc1> tops $73 on surge in trading volume
By Carolyn Cohn and Mike Dolan
LONDON, June 30 (Reuters) - MSCI's world equity index was
set on Tuesday to cement its best quarterly gain since its 1988
launch as it pushed higher on the final day of a quarter that
saw markets rally on a stabilisation of the world economy.
Reinforcing the view the worst of the credit crisis and
subsequent world recession may finally be passing, crude oil
prices were on course for their strongest quarter in 19 years.
Investors have detected signs of a freeing up of primary
bond and credit markets, a cyclical, inventory-driven rebound in
manufacturing, an easing of the housing market attrition and
some rebound in business and consumer confidence.
Stirrings in the real economy show the authorities have
gained traction against the downturn via extraordinary monetary
policies, where official interest rates are near zero and
long-term borrowing rates have been capped by so-called
quantitative easing.
Together with massive fiscal stimuli from the United States,
China, consumer spending has steadied and demand for raw
materials has rebounded.
Sharply lower volatility, as measured by Wall St equities'
VIX index <.VIX>, has also encouraged a mass exodus of
investment money back out of safe-haven bunkers such as money
market funds and back to higher-yielding and more risky equity
and bond markets. To see a table on Q2 market moves click on
[]
Reuters June polls of asset managers, released on Tuesday,
showed investors put a greater share of their funds into stocks,
bonds and alternative investments than at any time since the
financial crisis blew up in the summer of 2007. []
"The first half of 2009 is ending on a far more positive
note than it began," said Mitul Kotecha, head of global foreign
exchange strategy at Calyon.
"Confidence has improved, data releases especially in Q2
2009 have revealed a much smaller pace of deterioration...risk
appetite is set to improve further in H2 2009 but, as with
economic recovery, the improvement will be gradual and prone to
setbacks."
UPBEAT AT HALF-YEAR
The world equity index, up 0.4 percent by 1100 GMT on
Tuesday, has risen over 22 percent in the past three months, and
is up 9 percent on the year, after suffering its worst quarter
on record in the last three months of 2008.
Risky emerging stocks <.MSCIEF> have put in an even stronger
performance, gaining over 34 percent on the quarter and around
the same amount on the year. The emerging market index edged up
a further 0.25 percent on Tuesday.
"Broader stability is helping to support gains in risk
assets," said Lee Hardman, currency economist at Bank of
Tokyo-Mitsubishi UFJ.
In Europe, the final day of the quarter was more muted and
the FTSEurofirst 300 index <> was little changed. Yet at a
rise of over 17 percent in the last three months was eyeing its
best quarterly gain since Q4 1999.
"We are still living under a credit crunch and the central
banks have very little choice but to keep interest rates quite
low for some time," said Luc Van Hecka, chief economist at KBC
Securities. "That may be one of the major fundamental reasons
why asset markets have a tendency to remain underpinned."
Wall St futures <SPc1> also were set to open higher later on
Tuesday after gains of almost one percent on Monday were driven
by oil stocks.
On Tuesday, oil prices leapt more than 2 percent to an
eight-month high above $73 a barrel <CLc1> before trimming gains
on the final day of its best quarterly gain in 19 years.
Trading volume in both Brent and U.S. crude oil futures
surged to more than 10 times the norm for the Asian time zone.
The safe haven U.S. dollar was weaker, dropping 0.3 percent
against an index of currencies <.DXY> and down 7 percent on the
quarter.
The pound hit its highest in 8 months above $1.6740 <GBP=>
after Nationwide data showed UK house prices surprisingly rose a
second month in June.
The euro gained 0.2 percent to $1.4106 <EUR=> and the dollar
fell 0.6 percent to 95.57 yen <JPY=>.
Euro zone government bond futures steadied at levels little
changed on the day after recovering early losses. <FGBLc1>.
(Additional reporting by Jeremy Gaunt, Atul Prakash and
Tamawa Desai; editing by Chris Pizzey)
