* Anxiety over imminent Syrian attack eases, caution rules
* World equities end selloff, Wall Street seen higher
* Dollar gains after U.S. GDP, jobless reinforce Fed
* Oil retreats from 6-month peak, gold off 3-1/2 month high
* Indonesia and Brazil lift rates to defend currency
By Richard Hubbard
LONDON, Aug 29 Strong growth in the U.S. economy
and signs of a delay in expected Western military strikes on
Syria lifted world share markets on Thursday, but investors were
on edge over potential future turmoil in the Middle East.
The American economy grew faster than expected in the second
quarter, new data showed, and weekly claims for unemployment
fell, bolstering the case for the Federal Reserve to begin
winding down its massive economic stimulus programme.
Wall Street stocks were set to gain on the data when trading
opens, while the dollar extended its gains against a
basket of major currencies to reach a three-week high.
But hard-hit emerging currencies in India, Brazil and
Indonesia were firmer against the greenback as their central
banks moved to stem capital outflows.
Most major risk asset markets had already been recovering
ahead of the U.S economic data on signs that divisions among
lawmakers in Britain and the U.S. would delay any imminent
action on Syria in retaliation for alleged gas attacks last
"The overall sentiment remains cautious, but the fact that
military action against Syria doesn't look imminent any more is
prompting a number of investors to bet on a rebound," said
Guillaume Dumans, co-head of research firm 2Bremans.
President Barack Obama has told Americans a military strike
against Syria is in their interests, and administration
officials are expected to brief congressional leaders on
Thursday about plans to respond.
In the oil markets, the reduced likelihood of an immediate
major supply disruption saw Brent crude drop to around $116 a
barrel, ending its strongest two-day gain since January
2012. U.S. oil was down 85 cents to $109.22 following its
near 4 percent gain over the past two days.
"The market is reassessing the supply implications of the
conflict in Syria," said Eugen Weinberg, global head of
commodities at Germany's Commerzbank.
Traditional safe-haven gold eased 0.5 percent to
around $1,413 an ounce after reaching a 3-1/2 month high in
Wednesday's flight to safety.
The better tone in world equity markets emerged after energy
shares on Wall Street gained on the back of the rise in oil
prices, and this spread to Asia where MSCI's Asia-Pacific index,
excluding Japan, rose 1 percent.
European stocks joined the charge higher, lifted by a surge
in Vodafone shares on renewed talks with Verizon,
while U.S. stock index futures pointed to further gains when
Wall Street reopens later .
The MSCI world equity index, which tracks
shares in 45 countries, was virtually flat by mid-morning in
Europe, but lost two percent this week as the Syrian tension
adds to worries about the impact of an expected reduction in the
Federal Reserve's stimulus policy.
Most analysts see the Fed cutting back on the $85 billion a
month it spends buying bonds to boost economic activity next
month, though this week's sudden rise in oil prices and the sell
off in emerging markets have complicated the outlook.
European shares meanwhile were making good gains across the
board on Thursday, helped by the resolution of a political
crisis in Italy and evidence of steady improvement in corporate
The FTSE Eurofirst 300 index of top European firms
was up 0.35 percent while Italy's main benchmark index, the
FTMIB , outperformed with a rise of 0.4 percent.
However, an auction of new Italian debt showed investors
remained concerned about the shaky coalition with the government
borrowing costs over five years rising.
World currency markets have stabilised, with the dollar
rising against major developed world currencies to its strongest
level in two weeks, while the actions among some emerging
market nations limited their losses against the greenback.
The dollar was up about 0.7 percent against the yen at 98.32
yen, and gained against the euro to leave the single
currency down 0.7 percent at $1.3250.
"A slight easing of the tensions in Syria and emerging
markets, has helped the dollar," said Simon Derrick head of
currency research at Bank of New York Mellon.
In emerging markets, Brazil's decision to raise its
benchmark interest rate to a 16-month high of 9
percent on Wednesday helped stabilise the real, while in
Indonesia the rupiah strengthened slightly after its central
bank hiked its key lending rates.
The Indian rupee rose as high as 66.85 per dollar, up
sharply from a record low of 68.85 per dollar hit on Wednesday
when its central bank moved to provide dollars directly to oil
companies to give the currency some relief.
Emerging market currencies in countries with high current
account deficits such as India, Turkey and Brazil have plunged
between 12 and 18 percent against the dollar this year, as
portfolio flows exited on expectations of a withdrawal of the
U.S. monetary stimulus that has boosted riskier assets.