World equities rise, helped by earnings

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Equities rose across the world on Friday after encouraging earnings signals from technology firms such as IBM and a slowly improving tone in beleaguered short-term money markets helped ease recession fears.

European shares were up more than 3 percent following gains in Asia. Overnight, Wall Street ended a volatile Thursday with gains of more than 4 percent.

The dollar was flat to weaker against major currencies and euro zone government bonds sold off mildly. Oil prices rose nearly $2 a barrel to near $72, helped by the equity gains and growing expectations for an OPEC production cut.

Investors have been shifting their attention over the past week from the still volatile financial crisis to the prospect of a global recession.

"There's still nervousness in the market about the real economy, but in terms of valuations the price is good right now," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Japan.

"The economic problems are the main theme of the market right now and everybody knows this, so rises will be limited."

Among the factors helping investors look past the immediate problems were some better-than-expected corporate news.

International Business Machines Corp (IBM.N) said on Thursday it expects to meet long-term profit forecasts, partly due to continued growth in emerging markets.

Meanwhile, U.S. firms such as internet search leader Google Inc and chip maker Advanced Micro Devices Inc posted results after U.S. market hours that beat expectations.

On the credit front, recent unprecedented measures by central banks to inject liquidity into the financial system appeared to be bearing some fruit.

Three-month dollar lending rates were around 4.5 percent compared with more than 6 percent at the beginning of the week.

Until bank-to-bank lending -- frozen for much of the last year by uncertainty over which faced financial disaster -- is flowing freely again, corporate activity and consumer spending cannot hope to recover from the crisis.

RECOVERY?

MSCI's main world stock index, which has lost more than 40 percent of its value this year, was up 1.5 percent on the day.

The pan-European FTSEurofirst 300 gained 3.6 percent and Japan's benchmark Nikkei closed up 2.8 percent after losing more than 11 percent on Thursday.

On currency markets, the yen gained. The dollar was down a quarter of a percent at 101.30 yen and the euro fell the same to 136.57 yen

Dollar/euro was flat at $1.3474

Ten-year euro zone government bonds yielded 4.084 percent, up 2 basis points and two-year debt yielded 2.929 percent up 1 basis paint.