GLOBAL MARKETS-Shares steadier as emerging market sell-off eases

* Wall Street opens higher, MSCI (NYSE: MSCI - news) world index stuck near

4-month low

* European shares pare losses; Nikkei has worst day since


* Dollar bobs higher from two-month low against yen

* Aussie rallies after RBA drops easing bias

By Marc Jones

LONDON, Feb 4 (Reuters) - World shares steadied after

falling to a near four-month low on Tuesday as a bounce in

battered emerging market currencies and a positive start for

Wall Street helped lift some of the recent gloom.

A weaker-than-expected report on U.S. factory activity had

hit global equity markets and the dollar hard on Monday but

European shares had clawed back most of their morning losses by

the time Wall Street reopened.

After the previous session's pounding, the S&P 500 and Dow

Jones Industrial indexes opened 0.6 and 0.4 percent higher while

many hard-hit emerging currencies rose from their recent lows.

U.S. factory orders released shortly after Wall Street open

bolstered the fragile mood, nevertheless, there remained plenty

to keep traders on edge.

The market volatility had seen Russia cancel a bond auction

for the second week running, while another round of stock market

bloodletting, particularly in Asia, has left MSCI's world index

at its lowest level since October.

"This emerging crisis does matter if it worsens because it

will have an impact on global growth," said Daniel McCormack, a

strategist at Macquarie in London.

"The other thing that is that earnings are just not coming

through. The market was jittery before this crisis came along,

in the sense that it was worried about earnings, and this has

just been the catalyst that crystallises those worries."

Early losses for Europe's top shares had been all

but erased but the time U.S. markets opened, but it was the 4

percent plunge in Japan's Nikkei, cementing its position as

2014's worst performing major index, that hogged attention.

The recent turbulence has spread from vulnerable emerging

markets as major economies like the United States begin to pull

back the throttle on stimulus programmes undertaken following

the global financial crisis.

The promise of a gradual exit from ultra-loose monetary

policy has boosted likely returns in developed markets but

driven investors out of the emerging countries they favoured

while returns on U.S. and European assets fell to near-zero.


The earlier flight to safety had seen yields on German

government bonds, considered to be one of Europe's

most secure investments, hit their lowest in six months

but signs the sell-off was easing nudged them up.

Emerging market stocks also pared losses, while

hard-hit currencies including Turkey's lira, Russia's

rouble, Hungary's forint and the South African

rand all moved away from their recent lows.

"Experienced emerging market investors would be looking at

this sell down with great interest, looking to pick up quality

names on the dip, but they are still in the minority for now,"

said Erwin Sanft, Standard Chartered (HKSE: 2888.HK - news) 's Hong Kong-based China

equity strategist.

Among larger currencies, the Australian dollar jumped

after its central bank appeared to shut the door on further rate

cuts, while another round of strong UK construction data left

sterling looking sprightly.

Much of the focus remained on the U.S. dollar's contest with

the yen, where two factors were at play. The dollar was hit

initially after the weak data had pushed down U.S. bond yields,

while the Nikkei's plunge pushed up the yen, against which it

often see-saws.

The U.S. dollar appeared to be recovering, however, and it

was last up 0.4 percent at 101.40 yen, after hitting its

lowest level since November on Monday at 100.77 yen.


The stock market gyrations saw the VIX, the market's

fear seismograph, jump to its highest since June.

The Nikkei's 4 percent dive meant it has now shed 14 percent

of last year's 50 percent boom. By comparison, the U.S.

benchmark S&P 500 is down 5.8 percent and the

FTSEurofirst 300 has dropped 3.3 percent.

"With the main European indices down around 7 percent (since

peaks), chatter on trading desk is about whether we are in for a

'10 percent' correction," Jonathan Sudaria, a dealer at Capital

Spreads in London, said in emailed comments.

With risk appetite gradually beginning to seep back into

stock and currency markets, the safe-haven appeal of gold waned

to leave it down 10 cents at $1,258.84 an ounce.

Among other perceived safe assets, the yield on benchmark

10-year U.S. Treasury notes rose to 2.611 percent as

U.S. trading began. It fell as low as 2.582 percent on Monday,

its lowest since Nov. 1.

Three-month copper, a metal highly attuned to global growth,

also shrugged off its early gloom. It climbed to $7,060 on the

London Metal Exchange, as it looked to dodge its 10th

straight loss and its longest run of falls in 37 years.

"There's some buying interest because the emerging market

crisis is going to be temporary and is not going to include a

meltdown in China," said Jesper Dannesboe, senior commodity

strategist at Societe Generale (Paris: FR0000130809 - news) .