World shares recover as central bankers ease liquidity fears

US Fed, China central bank comments lift shares, bonds off lows on Tuesday

A late recovery in Chinese stocks and comments by top Federal Reserve officials that eased fears of an imminent end to its stimulus lifted shares and bonds off their lows on Tuesday and cooled a rally in the dollar.

China shares pared recent hefty losses to near 4-1/2-year lows after Chinese central bank officials sought to reassure investors that liquidity would be kept at an appropriate level to support growth.

The dollar and US bond yields came off their peaks after two Fed officials downplayed the notion of an imminent end to monetary stimulus and said on Monday that market reaction was not yet a cause for concern.

Markets - from safe-haven US Treasuries to riskier stocks, credit instruments, and emerging market assets - have tumbled for nearly a week on fears of a credit squeeze in China and an early end to the Fed's massive bond buying programme.

Both sets of comments were seen as likely to soothe market nerves and bring at least a temporary halt to selling.

"After all the moves we've seen in US dollar buying, selling bonds, selling equities, I think we're seeing a retracement now, I think we're going into a consolidation period," said Greg Matwejev, Director of FX Hedge Fund Sales and Trading at Newedge.

In early European trade, the broad FTSEurofirst 300 index gained 0.8% to 1,122.44 points, after falling 5.5% over the past three trading days.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.2% but had been as much as 1.2% lower on the day.

The dollar dipped 0.15% against a basket of major currencies and eased 0.25% against its Japanese counterpart, to 95.45 yen.