* MSCI world equity index up 0.3 percent at 325.07
* Yen surges to record high of 76.25 per dollar
* European stocks, U.S. stock futures higher; oil rises
By Natsuko Waki
LONDON, March 17 (Reuters) - The yen briefly hit record
highs versus the dollar on Thursday as quake-hit Japan's nuclear
crisis unleashed a global risk sell-off, while world stocks
traded higher after Tokyo stocks came off earlier lows.
Risk aversion fanned expectations Japanese investors would
sell overseas assets, including lucrative carry trades, to bring
home funds. The yen rose as high as 76.25 per dollar <JPY=>,
levels which raised intervention concerns.
Developments at Japan's quake-hit nuclear plant remained a
main source of worry for investors. Japanese military
helicopters dumped water and a water canon was also used to
douse an overheating nuclear reactor but radiation levels at the
plant remained high [].
"There is short covering at this point, and we continue to
see outflows," said David Thebault, head of quantitative sales
trading, at Global Equities, in Paris.
"Stocks might look oversold on the short term, but they are
not if we're heading into a bear market. The Japanese crisis
could have severe consequences for the global economy."
MSCI world equity index <.MIWD00000PUS> rose 0.3 percent,
moving away from this week's three-month low. It hit 30-month
highs in mid-Feb but it has erased all of this year's gains.
Tokyo stocks fell 1.4 percent <>, recovering from the
intraday low as cheap valuations attracted foreign buyers.
Earlier this week, Japanese stocks suffered their worst two-day
sell-off since 1987.
The Thomson Reuters global stock index <.TRXFLDGLPU> was
steady on the day. The FTSEurofirst 300 index <> rose 0.6
percent as a recent sell-off attracted bargain hunters.
U.S. stock futures rose 0.7 percent <SPc2>, pointing to a
firmer open on Wall Street later after its fear gauge, VIX
<.VIX>, hit 29.40 on Wednesday, its highest since July.
"A deterioration of the nuclear situation via a significant
increase in radiation levels would lead us to review our
positioning," said Paul Marson, chief investment officer of
Lombard Odier Private Bank.
"But if the authorities manage to contain the situation, the
Japanese equity market would appear to be extremely cheap by
historical standards in a particularly loose monetary
environment."
Emerging stocks <.MSCIEF> fell 0.7 percent.
U.S. crude oil <CLc1> rose 1.8 percent to $99.78 a barrel as
investors focused on concerns about potential supply disruptions
from an escalating turmoil in Bahrain.
Bahrain arrested at least six opposition leaders, a day
after its crackdown on protests by the Shi'ite Muslim majority
raised fears of a regional conflict. []
INTERVENTION THREAT
In European trading, the yen was trading at around 78.50 per
dollar. Traders said a break of 79.75 on Wednesday unleashed a
sharp selling of the dollar.
Japanese margin traders were cited as one of the main
factors behind the move as stop-loss orders were triggered in
their leveraged bets in currencies like the Australian dollar.
Traders also said foreign investors were scrambling to get
hold of yen to settle margin calls on bets on Japanese shares,
forcing them to turn to spot currency at times as well as
forwards <JPYF=> and cross-currency swaps <JPYCBS=TKTL>.
Japan's finance minister Yoshihiko Noda blamed speculation
for the yen spike and said he was closely watching markets.
Group of Seven finance leaders and central bankers will discuss
possible steps to calm markets at 2200 GMT. []
G7 finance ministers are not expected to agree firm policy
action, a G7 source said. []
The dollar <.DXY> hit a four-month low against a basket of
major currencies. The euro rose to a four-month high of $1.4014
<EUR=>, boosted by solid demand at a Spanish bond auction and on
the view euro zone interest rates may rise as soon as April.
Spain sold 4.1 billion euros of debt, drawing solid demand
although yields for the 30-year bond rose. []
German government bond futures <FGBLc1> fell 30 ticks.
(Additional reporting by Blaise Robinson; Editing by Ron
Askew)
