GLOBAL MARKETS-Shares, euro move higher as Spain nerves persist

Last Updated: Fri, Sep 21, 2012 12:38 hrs

* European shares up 0.3 pct, U.S expected to open up

* Euro rises 0.11 pct, dollar index struggles

* Spain rescues request eyed

* German Bund futures dip

By Marc Jones

LONDON, Sept 21 (Reuters) - World shares and the euro clawed their way back up on Friday and oil rebounded from a 1-1/2 month low as investors brushed aside the latest news of Britain's and Italy's economic and debt problems amid hopes Spain is gearing up to accept EU and ECB aid.

Having ended three of the last four sessions in the red, the FTSEurofirst 300 was clinging to 0.3 percent gains by midday, providing fragile support to a 0.3 rise in the MSCI global index.

The arrival of Apple's latest iPhone in global stores was expected to help lift U.S. stock markets when trading resumes. Like many indices, Wall street has been subdued this week as investors cool off after blistering 15-20 percent rallies in top equities markets since June.

Despite early momentum, Frankfurt's Dax was the only top European equities index left firmly in positive territory at 1200GMT as markets see-sawed as options contracts expired.

"The options roll-offs are giving a lot of volatility ... at the moment it's very, very difficult to say whether the moves are fundamentally driven or order-driven," said Michael Hewson, senior markets analyst at CMC Markets.

Markets brushed off a well-flagged report from the UK showing its plans to bring down its deficit have fallen behind target as the European debt crisis has hit global growth.

It followed Italy's warning late on Wednesday that its recession will be far more severe than forecast, making it harder to reduce the country's debt burden.

The euro, which has lost around 1.5 percent since hitting a 4-1/2 month high a week ago, was up 0.1 percent at $1.2975 by lunch having briefly climbed back above the psychological $1.30 mark.

The dollar fell 0.1 percent against a basket of currencies, with the its index at 79.335, bringing it closer to a six-and-a-half month low of 78.601 hit last week in the wake of aggressive monetary easing by the U.S. Federal Reserve.

With all eyes on whether Spain will call for aid, support for the euro was seen at Thursday's low, which stood just above its 233-day moving average at $1.2915.

"It is just a matter of time before Spain applies for financing in the coming weeks and that will be euro positive," said Carl Hammer, chief currency strategist at SEB in Stockholm.


Underlining the fears about faltering global growth, the World Trade Organisation cut its global trade forecast to 2.5 percent from 3.7 percent on Friday.

In bond markets, the appetite for risk remained fragile following Italy's government warning the country's recession would be worse than feared.

Spain and Italy's 10-year bond yields were slightly higher although demand for German government bonds also eased, with December Bund futures 15 ticks lower at 140.15.

Spain appears to be slowly moving towards requesting financial assistance. The government is considering freezing pensions and speeding up a planned rise i n the retirement age to meet conditions for aid, sources with knowledge of the matter told Reuters.

The ECB's new plan, which requires struggling countries to submit to fiscal rehabilitation programmes in order to qualify for bond-buying support in the open market, has been one of the key factors in the sharp drop in Italian and Spanish borrowing costs and the 15-20 percent surge in major stock markets.

Finnish ECB policymaker Erkki Liikanen reiterated the ECB's intention to stabilise the bloc's strained bond markets, saying inflamed borrowing costs based on speculation the euro could break apart were "unacceptable".


Wheat prices, which have only just started to ease after surging more than 40 percent since June, were on the rise again as Russia warned it could ban wheat exports if its domestic prices continue to rise

"I think this is likely to produce a lot of upward pressure on prices," said analyst Sudakshina Unnikrishnan of Barclays Capital, adding today's comments followed recent vehement denials that such action would be considered.

Oil prices, which have risen by almost a third since June but have eased this week, edged back up to $111 a barrel on Friday as Libya's precarious security situation and lower North Sea production stoked supply fears.

"We saw oil prices spike up around 30-32 percent last year when Libya was out of the market," said Natalie Rampono, a commodity strategist at ANZ. "This is something to focus on, especially if the security situation deteriorates."

Gold prices hovered at a 6-1/2 month high, crawling up 0.2 percent to $1,770.76 an ounce supported by the ongoing lift from the recent aggressive moves from the Fed, ECB and the bank of Japan.

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