Investors seek stock, euro bargains

LONDON: World stocks climbed off four-week lows on Wednesday and the euro recovered some ground against the dollar as investors sought bargains in recently hard-hit markets. Wall Street looked set to open higher.

The hunt for cheaper assets, however, was tempered by disappointing US economic data on Tuesday and continuing concerns about the euro zone's struggle to control debt in its peripheral economies, particularly Greece.

Europe's top financial officials broke a taboo on Tuesday and acknowledged for the first time that Greece may have to restructure its debts, a move which could stoke Europe's sovereign debt crisis..

Yields on a German bond auction were lower and those at a Portuguese sale higher than in previous bidding, reflecting the perceived safety of bonds from the euro zone's strongest economy while countries on the bloc's periphery struggle.

World stocks as measured by MSCI were up half a percent, bouncing off Tuesday's losses, which took the index to its lowest since April 18.

Europe's FTSEurofirst 300 gained around a third of a percent.

Investors have become more cautious in the past month faced with unanswered questions about slow US growth, Chinese overheating and Europe's debt woes.

U.S factory output slipped for the first time in 10 months in April as a shortage of parts from disaster-hit Japan crimped activity.

While many investors consider the overall outlook to be positive, those sort of signs have led to a pull back from risk.

"It seems to me that we are going to be stuck in a trading range for a little while," said Mike Lenhoff, chief strategist at Brewin Dolphin.

Earlier, Japan's Nikkei climbed 1 percent, helped by a weaker yen and hence better exporting prospects.

EURO CLIMBS

The euro rose against the dollar, recovering from a seven-week low earlier in the week, but wariness over Europe's sovereign debt problems kept investors nervous about piling up euro positions.

"The euro is still in a correction phase after recent declines," said Hideki Amikura, a forex manager at Nomura Trust and Banking. "It has the potential to advance towards $1.43-$1.44 on hopes for more buybacks by foreign investors."

The shared currency gained 0.1 percent to $1.4253. It slumped to a seven-week low of $1.4048 on Monday.

In the euro zone government debt auctions, Portugal sold 1.0 billion euros ($1.4 billion) in two-month T-bills, at the top of the indicative offer range. The average yield rose to 4.657 percent from 4.652 percent in an auction of three-month paper -- the closest comparable maturity -- on May 4.

Germany sold 4.9 billion euros in five-year bonds with the average yield falling to 2.45 percent compared with 2.68 percent in April.

"There is still robust demand, and obviously we don't need to look far for the reasons," said WestLB rate strategist Michael Leister.