Risk appetite bolsters dollar, global stocks

By Toni Vorobyova

LONDON (Reuters) - Improved risk appetite bolstered equities and the dollar on Wednesday, and pushed emerging market debt spreads to their narrowest levels this year 11EMJ.

The UBS risk index showed risk appetite hitting a 10-month high thanks to decreasing currency and equity market volatility, the out-performance of stocks versus U.S. government bonds and the tightening spreads between emerging market debt and Treasuries.

"There is positive sentiment overall that started last week with some believing that the credit crisis is over and the U.S. downturn wouldn't be as bad as feared," said Beat Siegenthaler, chief strategist at TD Securities.

Europe's technology shares were cheered by forecast-beating results from Cisco Systems (CSCO.O: Quote, Profile, Research, Stock Buzz), the largest U.S. makers of routers and switches that direct Web traffic. The construction sector was the second best performer thanks to a jump in profits at France's Lafarge (LAFP.PA: Quote, Profile, Research, Stock Buzz), the world's biggest cement producer.

Both Cisco and Lafarge benefited from stronger demand in emerging markets.

The FTSEurofirst 300 share index rose 0.6 percent to 1,360 points , while the Tokyo bourse notched up a four-month closing high. U.S. equity futures, though, pointed to a subdued open on Wall Street SPc1.

"The market's mood has changed. We are past the worst, but it's too early to be fully optimistic," said Noritsugu Hirakawa, strategist at Okasan Securities.

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