* MSCI world equity index up 0.3 percent at 344.01
* Fed signals, financial sector results aid shares
* Dollar hits 7-month high vs yen
By Natsuko Waki
LONDON, Aug 6 (Reuters) - World stocks edged higher on
Wednesday after the Federal Reserve signalled it was in no rush
to raise interest rates, while encouraging results from the
financial sector and oil prices below $120 a barrel also helped.
The U.S. central bank left rates steady as expected at 2.0
percent on Tuesday, expressing concerns about both economic
growth and inflation. This soothed investors who feared that
rising price pressures would prompt it to raise the cost of
borrowing in the near future.
Oil prices dropped further to a fresh three-month low below
$119 a barrel before recovering slightly. The dollar rose to
seven-month highs versus the yen as falling oil prices eased
concerns about the burden on corporates and consumers.
Investors also cheered results from the financial sector.
BNP Paribas <BNPP.PA> and Commerzbank <CBKG.DE> reported
above-forecast results, while U.S. bond insurer Ambac <ABK.N>'s
second-quarter earnings jumped, helped by valuation gains on
credit derivatives.
"Investor angst has turned to optimism quickly, and there's
a feeling that things will be okay and we can move on," said
Heinz-Gerd Sonnenschein, strategist at Postbank in Bonn.
The FTSEurofirst 300 index <> rose 0.2 percent while
the MSCI main world equity index <.MIWD00000PUS> rose a third of
a percent, coming off Tuesday's three-week lows.
Stocks trimmed gains after U.S. mortgage lender Freddie Mac
<FRE.N> reported worse-than-expected results and posted its
fourth consecutive quarterly loss.
U.S. stock futures <SPc1> were down 0.2 percent, pointing to
a weaker open on Wall Street later.
DOLLAR GAINS
The dollar rose as high as 108.70 yen <JPY=> as falling oil
prices overwhelmed disappointment that the Fed may not deliver a
yield-boosting interest rate hike soon. Firmer risk appetite
also dented the low-yielding yen, widely used to buy
higher-yielding assets in carry trades.
"There's been a tentative return to open carry trades and
the rally in stock markets has helped that," said Adam Cole,
global head of FX strategy at RBC Capital Markets. "That has
helped drive yen short positions."
The dollar was steady against a basket of major currencies
<.DXY>.
According to interest rate futures contracts, investors
expect the Fed to start raising interest rate only in January.
A Reuters poll of 17 primary dealers, banks who deal
directly with the Fed, found them unanimously predicting that no
interest rate changes would occur in the next two meetings, in
September and October. []
Emerging sovereign spreads <11EMJ> tightened 1 basis point
while emerging stocks <.MSCIEF> rose 1 percent.
Howver, government bonds in Japan and the euro zone rose
too, reflecting concerns over the slowing economy.
The September Bund future <FGBLU8> rose 30 ticks while
Japanese government bond futures <2JGBv1> rose to four-month
highs.
U.S. light crude <CLc1> stood at $119.45 a barrel after
falling as low as $118.10, hit by concerns over weakening
demand. Gold <XAU=> was slightly higher at $884.50 after hitting
its lowest level in seven weeks.
This week's fall in oil and commodities come after broader
commodity prices <.CRB> posted their biggest monthly loss in at
least 10 years in July.
(Additional reporting by Sitaraman Shankar and Alastair Sharp;
Editing by Ruth Pitchford)
