GLOBAL MARKETS-World stocks up as optimism outweighs concerns

* World stocks at near three week highs

* Wall Street set for gains

* Yen hit by U.S., Europe rate expectations

By Jeremy Gaunt, European Investment Correspondent

LONDON, March 30 (Reuters) – World stocks rose to near
three-week highs on Wednesday, driven by optimism about
potential gains in the coming quarter and setting aside concerns
about Japan’s nuclear crisis and turmoil in the Arab world.

Wall Street also looked set to open higher.

Japan’s yen dipped to a 10-month low against the euro and
neared a three-week trough versus the dollar on expectations
that interest rates will rise in Europe and the United States.

In recent days, several top U.S. central bank officials have
said further bond purchases by the Federal Reserve are not
needed to support the economy, while the European Central Bank
is seen as all-but certain to raise rates in April.

MSCI’s all-country world stock index (.MIWD00000PUS: Quote, Profile, Research) was up
0.6 percent, taking its year-to-date gains to nearly 3.5 percent
and up more than 6 percent since a post-Japan earthquake low on
March 15.

Emerging markets (.MSCIEF: Quote, Profile, Research) were up more than 1 percent on
the day at a two-month high.

This has occurred despite serious headwinds from political
revolts in North Africa and the Middle East, and the economic
fears stemming from Japan’s triple disasters.

“The two big geopolitical stories — the aftermath of the
earthquake in Japan and unrest in Libya — remain vary much in
play but with the backdrop not changing significantly on a
day-by-day basis, it does seem as if markets are now keen to try
and turn the page,” said Ben Potter, an analyst at IG Markets.

“Clearly there is still scope for significant developments
here but there is little appetite around to speculate on these
outcomes for now.”

The pan-Europe FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) gained 0.9 percent.

“It does not seem to want to go down despite everything that
is thrown at it,” said Andrea Williams of Royal London Asset
Management.

Earlier, Japan’s Nikkei average (.N225: Quote, Profile, Research) climbed 2.6 percent,
hitting its highest level since suffering a post-quake panic
sell-off.

RATE DIFFERENTIAL

On currency markets, the yen fell broadly, hitting 10-month
lows against the euro and touching its lowest level in nearly
three weeks versus the dollar as interest rate differentials
widened in favour of U.S. and European currencies.

“We’ve had comments from the Fed and a shift in sentiment
towards the U.S. policy from a rate perspective that has really
pushed U.S.-Japan yield differentials, driving the dollar
higher,” said Mitul Kotecha, head of global FX strategy at
Credit Agricole in Hong Kong.

The dollar gained 0.8 percent to 83.11 yen (JPY=: Quote, Profile, Research) and the
euro (EURJPY=: Quote, Profile, Research) gained 0.6 percent to 117.11 yen.

The euro was down 0.1 percent at $1.4091 (EUR=: Quote, Profile, Research).

German 10 year bond yields were slightly higher
(DE10YT=TWEB: Quote, Profile, Research), tracking price losses in U.S. Treasuries after
Fed officials enccouraged expectations of broadly tighter
monetary policy.

Portuguese and Greek bonds also looked set to remain
pressured after a new round of rating downgrades.[ID:nLDE72S1LY]
(Additional reporting by Natsuko Waki, Atul Prakash and Joanne
Frearson; Editing by Ron Askew)

GLOBAL MARKETS-World stocks up as optimism outweighs concerns