* Energy pulls Europe shares higher, Asia stocks hit
* Euro zone bond yields dip as ISM data seen pressing ECB to
* Dollar falls vs yen on Fed view, sterling drops on factory
* Oil prices rise but market sceptical of output deal
By Nigel Stephenson
LONDON, Sept 7 World stocks hit their highest in
more than a year and the dollar fell against the yen on
Wednesday as expectations of a rise in Federal Reserve interest
rates receded after weak U.S. economic data.
Wall Street looked set to open flat to slightly lower,
according to index futures.
Emerging market shares led the charge, touching their
strongest levels since July 2015 as investors sought returns
with interest rates likely to stay low for a prolonged period.
European shares reversed early losses. The Stoxx 600 index
edged up 0.1 percent towards eight-month highs hit on
Monday, led by a rise of almost 1 percent in oil and gas shares
Oil prices rose even though many market participants
remained doubtful producers would reach a deal to freeze output.
Banks, for whom rock-bottom interest rates promise
tough times, initially fell before turning slightly positive.
Euro zone government bond yields fell as some investors bet
the weak U.S. data, which followed weaker-than-expected jobs
numbers on Friday, would pressure the European Central Bank to
ease monetary policy further. The ECB meets on Thursday.
"With a September rate hike looking less likely to happen,
the ECB might be more pressured to come up with a decision this
week on further measures," said Benjamin Schroeder, senior rates
strategist at ING.
In Asia, MSCI's main Asia-Pacific stock index, excluding
Japan was up 0.2 percent, having earlier touched
its highest since July last year. This helped lift MSCI's
all-country world index to its highest since
"When people think there's no immediate rate hike from the
Fed, then Asia and emerging markets are the place to go to, as
investors seek yields," said Toru Nishihama, senior economist at
Dai-ichi Life Research.
Japan's Nikkei index, however, retreated 0.4 percent
as a strong yen hurt exporters.
The dollar was last down 0.4 percent at 101.56 yen,
having fallen as low as 101.18, its weakest since Aug. 16.
The dollar fell 1 percent against several major currencies
on Tuesday after Institute for Supply Management data showing
activity in the U.S. service sector slowed to a 6-1/2-year low
in August and diminished the already slim prospects for a Fed
rate hike this month.
The dollar index, which measures the greenback
against a basket of major currencies was flat. The euro was down
0.1 percent at $1.1242.
Sterling, which topped $1.34 for the first time in
seven weeks on Tuesday after the ISM data, pulled back 0.5
percent to $1.3376 after British manufacturing output fell 0.9
percent in July, its biggest drop in a year.
The data was the first to cover output solely for the period
after the June 23 vote to leave the European Union.
"Sterling has been lifted in recent weeks by very strong
data, but this output data shows it's been a pretty mixed bag
following the referendum," said Societe Generale currency
strategist Alvin Tan.
The Swedish crown rose around 0.2 percent to 9.52
per euro after the Swedish central bank kept interest rates
unchanged as expected.
Oil prices, which have been on a rollercoaster in recent
days as expectations of whether a deal to curb a global glut can
be reached have waxed and waned, edged up.
Brent crude, the international benchmark, gained 52
cents to $47.78 a barrel. It rose as high as $49.40 on Monday,
having fallen to $45.32 on Sept. 1.
The reduced expectations of a Fed hike also lifted other
commodities. Copper hit a two-week high at $4,688 a
tonne, while gold touched a 2 1/2-week peak above $1,352
an ounce before pulling back.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Hideyuki Sano in Tokyo, Jemima Kelly
and Abhinav Ramnarayan in London)