World stocks up as fears ease on US economy, Greece

Easing fears about the US economy and European debt lifted world equity markets on Monday, extending a rally that has taken many bourses into positive territory for the year.

MSCI's all-country world stock index was up 0.6 percent, driven by strong performances in Japan and emerging markets. European shares were flat to higher in early trading.                                          

Friday's US data -- showing US employers cut fewer jobs than expected last month and that consumers showed signs of shedding their penny-pinching behaviour -- lifted sentiment.

Worries about Greek and other peripheral euro zone economy debt were also calmed by a series of weekend comments by politicans and policy makers.                                          

French president Nicolas Sarkozy promised on Sunday that euro zone countries would help Greece if its financial problems worsened and vowed a crackdown on market speculators.

The cost of insuring Greek sovereign debt fell and the yield spread between Greek bonds and benchmark German Bunds narrowed.

"The market is a little more positive, buoyed by what happened in the United States on Friday with the non-farm payroll figures," said Justin Urquhart Stewart, director at Seven Investment Management.

"There is also a view that, while Europe has not resolved its problems, the worst of what has happened to Greece has passed for the moment... But that is not to say it cannot come back."        

Japan's Nikkei gained more than 2 percent to close at a 6-week high. Europe's FTSEurofirst 300 was flat following six consecutive sessions of gains.                                                                                   

COOL GREECE                                           
Bond traders were digesting the statements of support for Greek debt from Sarkozy and others, with euro zone debt generally cheaper on the back of positive stock sentiment.  

The five-year credit default swap (CDS) on Greek government debt fell to 282.8 basis points from 296.2 bps at the New York close on Friday, meaning it now costs 282,800 euros per year to insure an exposure of 10 million euros of Greek debt.    

The GreekGerman 10-year government bond yield spread narrowed to 283 bps from 290 bps at Friday's settlement close and was well off a euro lifetime high of above 400 bps hit in January.

The yen and the dollar fell as the above-forecast US jobs data was seen boosting the prospects for a global economic recovery, lifting investor demand for risk and higher-yielding currencies.

The euro also gained after the supportive comments on Greece. The euro was up 0.3 percent at $1.3667. The dollar index was 0.3 percent lower at 80.207. Data showed currency speculators cut by more than half their long bets on the U.S. dollar in the week to March 2.