* MSCI world equity index up more than 1 percent
* Yen bounces off record high of 76.25 per dollar
* European stocks, U.S. stocks higher; oil rises
(Adds New York dateline, byline, updates with U.S. markets)
By Natsuko Waki and Al Yoon
LONDON/NEW YORK, March 17 (Reuters) - European and U.S.
stocks rebounded from three days of exhaustive selling on
Thursday even as Japan's nuclear power crisis continued, while
the yen rose but backtracked from a record high.
Markets speculated that Japanese investors would sell
overseas assets to bring home funds. The yen late on Wednesday
hit a record 76.25 per dollar <JPY=>, raising speculation that
central banks would intervene to stop the rise that could
further damage Japan's economy.
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 on an
overheating nuclear reactor, but radiation levels at the plant
remained high. For details, see []
"The absence of immediately worse news from Japan is
interpreted by equity traders as a reason to stop selling and
look for buying opportunities," Jim Vogel, an interest rate
strategist at FTN Financial, said in a note.
The MSCI world equity index <.MIWD00000PUS> rose 1.2
percent, bouncing from this week's three-month low. It hit
30-month highs in mid-February but has erased all of this
year's gains.
Tokyo stocks ended down 1.4 percent <> but had
recovered from intraday low as cheap valuations attracted
foreign buyers. Earlier this week, Japanese stocks suffered
their worst two-day selloff since 1987.
The Thomson Reuters global stock index <.TRXFLDGLPU> gained
0.7 percent. The FTSEurofirst 300 index <> rose 1.6
percent as a recent sell-off attracted bargain hunters.
The Dow Jones industrial average <> was up 140.85
points, or 1.21 percent, at 11,754.15. The Standard & Poor's
500 Index <.SPX> was up 17.10 points, or 1.36 percent, at
1,273.98. The Nasdaq Composite Index <> was up 35.76
points, or 1.37 percent, at 2,652.58
Wall Street's fear gauge, the VIX index, <.VIX>, fell 10
percent to 26.54 on Thursday. It rose to 31.28 intraday on
Wednesday, its highest since July.
"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."
Emerging market stocks <.MSCIEF> fell 0.4 percent.
U.S. crude oil <CLc1> rose 2 percent to $99.90 a barrel as
investors focused on concerns about potential supply
disruptions from 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
Early in New York, the dollar/yen exchange rate traded at
around 78.78 per dollar, up 0.83 percent from the close on
Wednesday. Traders said a break of 79.75 on Wednesday had
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>.
Japanese 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 0.68 percent to $1.3995 <EUR=>,
boosted by solid demand at a 4.1 billion euro Spanish bond
auction and on the view euro zone interest rates may rise as
soon as April.
Stabilization in Western stock markets reduced demand for
the safety of U.S. government debt. Benchmark 10-year note
yields rose 0.05 percentage point to 3.25 percent.
Gold <XAU=> fell 56 cents to $1,398.70 an ounce.
(Additional reporting by Blaise Robinson; Editing by Kenneth
Barry)
