* Wall Street set for rebound after steep fall on Friday
* Moody's cut Ireland rating by one notch to Aa2
* IMF/EU suspends review of Hungary's funding programme
* BP shares pressured by worries about well seepage
By Ian Chua
LONDON, July 19 (Reuters) - The selloff in global stocks
lost steam on Monday and the euro erased losses as investors
took Ireland's ratings downgrade in their stride, but worries
about the pace of U.S. economic recovery kept markets cautious.
After a steep fall last Friday, Wall Street looked set to
open higher with U.S. stock index futures <SPc1><NDc1> all
trading up between 0.3 to 0.6 percent ahead of earnings results
from companies including IBM <IBM.N>. []
Data at the end of last week showed consumer sentiment in
the world's biggest economy dropped to a near one-year low in
July and consumer prices fell for a third month in June,
highlighting sluggishness of the U.S. recovery. []
World stocks as measured by MSCI <.MIWD00000PUS> edged down
0.2 percent, having earlier fallen by as much as 0.5 percent,
while its emerging market counterpart <.MSCIEF> lost 0.6
percent.
In Europe, the FTSEurofirst 300 index <> recovered
from an early fall to be 0.2 percent higher on the day. Asian
stocks excluding Japan <.MIAPJ0000PUS> fell one percent.
"There was a bit of a wobble earlier on with BP dragging
down the markets, but buyers have been returning with sentiment
being helped by M&A talk in International Power," said David
Jones, chief market strategist at IG Index.
"I expect the market to gradually claw back gains
throughout the day as investors await International Business
Machines figures due out after the market close."
However, investors sold shares in Austrian banks because of
their exposure to Hungary after the IMF and the EU suspended a
review of Hungary's funding programme, meaning it will not have
access to remaining funds in its $25.1 billion loan package.
[]
Erste group bank <ERST.VI> fell 0.6 percent and Raiffeisen
international <RIBH.VI> shares slid 1.5 percent.
BP shares <BP.L> shed 2 percent as investors fretted about
possible seepage from the company's capped Gulf of Mexico well.
[]
EURO SEEN CAPPED
Sentiment for the euro was dented after Moody's cut the
credit rating of Ireland by one notch to Aa2. However, taking
the sting out of the downgrade, the rating agency placed the new
rating on a stable outlook.
Traders also said the Irish downgrade did not come as a
surprise given Moody's had a negative outlook on the country but
the timing did briefly unsettle markets.
The euro fell to a session low at around $1.2870 <EUR=D4> in
the wake of Moody's move, but swiftly recovered to $1.2960, up
0.2 percent on the day. Against the yen, the single currency
gained 0.9 percent to 112.88 <EURJPY=R>.
Near-term support for the euro is seen around the $1.2850
area, the 50 percent retracement of the euro's fall from a high
near $1.3820 on March 17 to a four-year low of $1.1876 hit in
early June.
Analysts said the recent rebound in the euro, which hit a
two-month high of $1.3008 on Friday, might be overdone.
"The euro's recent strength has been exaggerated by
positions, as people scale back from extremely short (euro)
positions," said Raghav Subbarao, currency strategist at
Barclays Capital.
"As people square positions, we don't see much further
upside from here."
The dollar <.DXY> was little changed against a basket of
major currencies.
With stocks recovering, demand for safe-haven government
bonds fell, driving yields higher.
The 10-year German bond yield <DE10YT=TWEB> rose 5.6 basis
points on the day to 2.657 percent, while the U.S. 10-year note
yield <US10YT=RR> gained 3.4 bps to 2.983 percent, having
earlier touched a 1-1/2 week low of 2.916 percent.
Commodity prices were off lows as well with U.S. crude
<CLc1> gaining 30 cents to $76.31 a barrel and copper <MCU3=LX>
climbing 0.5 percent to $6,533 a tonne, recovering from a
two-week low of $6,470 set earlier.
(Additional reporting by Joanne Frearson and Tamawa Desai;
Editing by Ron Askew) ((ian.chua@thomsonreuters.com; +44 207
542 7348; Reuters Messaging: ian.chua.reuters.com@reuters.net))
