* Comments by Fed's Dudley spark market rally
* September U.S. rate hike "less compelling"
* Eyes on Jackson Hole
By Jamie McGeever
LONDON, Aug 27 (Reuters) - Stocks rose around the world on
Thursday, following the biggest gains on Wall Street in four
years, after a U.S. Federal Reserve policymaker said the case
for an interest rate increase next month "seems less compelling"
than it was a few weeks ago.
Increased appetite for risk also lifted crude oil prices
further from last week's lows. The price of government bonds and
the Japanese yen fell.
In early European trading, the FTSEuroFirst index of leading
300 European shares was up 2.5 percent at 1,415 points .FTEU3 .
Germany's DAX .GDAXI , France's CAC 40 .FCHI and Britain's
FTSE 100 .FTSE were all up more then 2 percent.
"Financial market volatility has increased the likelihood
that the first Fed hike will occur later than the September
meeting," said Angela Hsieh at Barclays (LONDON:BARC). "The increasing
likelihood of a later Fed lift-off has lifted market sentiment."
New York Fed President William Dudley said on Wednesday that
arguments for a September rate increase "seems less compelling"
than they had only weeks ago, given the threat posed to the U.S.
economy by recent market turmoil.
Markets around the world plunged earlier in the week as a
slump in Shanghai shares fuelled worries over China's economic
health. Some calm returned after Beijing moved to ease policy
late on Tuesday.
The two main Chinese indices surged 5.3 percent .SSEC and
5.9 percent .CSI300 on Thursday, snapping a five-day losing
streak that had wiped off around 20 percent from market value
and sent tremors around global financial markets.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 2.7 percent, pulling away from a three-year
low reached earlier in the week and chalking up its best day in
three years.
Tokyo's Nikkei .N225 ended up 1.1 percent, adding to the
previous day's 3.2-percent gain, after U.S. stocks racked up
their biggest one-day gain in four years. .N
U.S. futures pointed to a rise of around 0.5 percent at the
open on Thursday, adding to the previous day's rise of almost 4
percent.
DAMAGE DONE
Dudley's comments on Wednesday came amid alarming market
volatility and just before many of the world's top central
bankers gather at an annual conference in Jackson Hole, Wyoming.
Investors will be watching the conference how the turmoil may be
shaking up policy plans.
Dudley also warned about over-reacting to "short-term"
market moves, leaving the door ajar to raising rates when the
Fed meets on Sept. 16-17.
"The damage to developed market shares has been done,
though, with the S&P500 still down 7.5 percent on the month,"
noted Simon Smith, chief economist at FxPro in London.
Emerging markets stocks and currencies were rebounding on
Thursday after Dudley's comments and a recovery by Chinese
equities. MSCI's benchmark emerging market stocks index
.MSCIEF surged 2.5 percent as it looked to top Tuesday's best
day in two years.
In currencies, the Japanese yen fell as investors
rediscovered their appetite for risk.
The dollar rose back above 120 yen JPY= , up a fifth of one
percent on the day and recovering from a seven-month low of
116.15 yen plumbed on Monday. The euro rose a third of one
percent above 136 yen EURJPY= .
The euro was steady against the dollar at $1.1320 EUR= ,
after losing 1.7 percent in the previous session. It reached a
seven-month peak of $1.1715 on Monday.
The euro was kept under pressure by comments from a senior
European Central Bank official. Peter Praet said falling
commodity prices and weakness in some overseas economies had
increased the chances the ECB would miss its inflation target.
The yield on 10-year German bonds rose 3 basis points to
0.74 percent EU10YT=RR . The equivalent U.S. Treasury yield was
steady at 2.16 percent US10YT=RR , having slumped as low as
1.91 percent on Monday.
Crude oil rebounded. U.S. crude futures CLc1 bounced 4.2
percent to $40.20 a barrel. The contracts had slumped to a 6
1/2-year low on Monday, dogged by supply glut woes and worries
about China's economy. Brent LCOc1 4 percent to $44.81.
Copper CMCU3 was up about 1.9 percent at $5,026 a tonne,
moving further away from Monday's six-year low of $4,855.
Gold regained some lost ground after suffering its biggest
fall in five weeks overnight as the dollar rebounded and U.S.
stocks rallied. Spot gold XAU= rose about 0.2 percent to
$1,127 an ounce. GOL/