NEW YORK: European and US stocks rebounded from three days of selling on Thursday, despite the ongoing nuclear plant crisis in Japan, while the yen traded near a record high against the US dollar.
Markets speculated that Japanese investors would sell overseas assets to bring home funds to pay for reconstruction after last Friday's earthquake and tsunami. As a result the yen hit a record high against the dollar of 76.25 yen as Asian markets began trading early Thursday.
The Group of Seven finance leaders and central bankers are expected to discuss steps to calm markets later on Thursday, and currency traders have interpreted remarks by some officials as indicating other central banks may give Japan their blessing to intervene to drive the yen lower against the dollar.
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 used on an overheating nuclear reactor, but radiation levels at the plant remained high.
"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 in Memphis, Tennessee, said in a note to customers.
However, the MSCI world equity index was up 1.2 percent, after hitting a three-month low earlier in the week. After hitting 30-month highs in mid-February, the index has now erased all of this year's gains.
Tokyo stocks ended down 1.4 percent earlier Thursday, coming off an intraday low as a more than 14 percent drop since March 10 attracted buyers. Earlier this week, Japanese stocks suffered their worst two-day selloff since 1987.
The Thomson Reuters global stock index gained 0.8 percent. The FTSEurofirst 300 index rose 1.8 percent as a recent sell-off attracted bargain hunters.
The Dow Jones Industrial Average rose 146.00 points, or 1.26 percent, to 11,759.30. The Standard & Poor's 500 Index climbed 17.72 points, or 1.41 percent, to 1,274.60 and the Nasdaq Composite Index increased 35.11 points, or 1.34 percent, at 2,651.93.
The index known as Wall Street's fear gauge, the VIX, fell 10 percent to 26.35 on Thursday, a day after hitting its highest level since July.
Many traders, however, said there were still reasons to be cautious as Japan had yet to contain its nuclear problem that could exacerbate the natural disaster's economic toll.
"The drop has been violent, but the newsflow remains very alarming," said David Thebault, head of quantitative sales trading at Global Equities in Paris. "There is short covering at this point, and we continue to see outflows.
"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," he said.
Emerging market stocks fell 0.45 percent.
In New York, the yen traded at around 79.25 per dollar, off the earlier record high that traders fear could trigger intervention by Japan.
The dollar hit a four-month low against a basket of major currencies. The euro rose 0.87 percent to $1.4022, 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 US government debt. Benchmark 10-year note yields rose 0.05 percentage point to 3.25 percent.
Gold rose $3.90 to $1,403.20 an ounce.
Oil prices soared more than 3.5 percent, climbing back above $101 per barrel Thursday.
Benchmark crude added $3.44 to settle at $101.42 a barrel on the New York Mercantile Exchange.
Oil prices have been pushed and pulled in recent weeks by international crises that could have major impacts on world oil supplies and demand.
In other Nymex trading for April contracts, heating oil gained 6.77 cents to settle at $3.0649 per gallon and gasoline futures added 10.69 cents to settle at $2.9506 per gallon. Natural gas rose 22 cents to settle at $4.158 per 1,000 cubic feet. In its weekly report, the Energy Department said the US natural gas supplies shrank by 56 billion cubic feet. Supplies are about 1.4 percent above the five-year average.
