LONDON, Nov 18 - European stocks clawed back some of the previous day's losses on Tuesday as the shadow of a weekend of bloody attacks receded and investors remained cautiously optimistic about an economic recovery. The dollar recovered from three-week lows against the euro hit on Monday but strong U.S. manufacturing data was offset by rising political concerns and the yen stabilised as Japanese stocks rebounded. Bond yields rose, hurt by the rebound in stocks, while oil dipped and safe-haven gold rose slightly. European stocks regained some lost territory on Tuesday after dropping to two-week lows on Monday with investors still optimistic about global economic recovery. "We don't subscribe to a view that we are going to start to see heavy selling," said Nigel Cobby, managing director of European equities at J.P. Morgan investment bank. "There is no massive decline in sentiment. Cautious optimism is the right phrase."
Stock markets had been unsettled by the weekend attacks on synagogues in Turkey coupled with a statement purportedly from al Qaeda claiming responsibility and threatening more attacks against the United States and its allies. Monday's late paring of losses on Wall Street and a bounce in Japan's Nikkei 225 index <.N225> put European investor sentiment on a more even keel. At 0950 GMT the FTSE Eurotop 300 index <.FTEU3> was up 0.53 percent at 927 points and the DJ Euro Stoxx 50 index <.STOXX50E> rose 0.47 percent to 2,598 points. Stock indices have been on an upward track for most of this year and despite remaining vulnerable to political shocks, investors are likely to remain focused on the improving economic environment "The market...does look somewhat tired, and it could pull back or at least pause for several weeks," Bob Doll, chief investment officer at Merrill Lynch Investment Managers, said in his latest market outlook. But "the bottom line is that we would expect the market to work its way higher due to reasonably good earnings."
DOLLAR, BONDS
Strong manufacturing data from the U.S. helped the dollar recover from the previous session's three-week lows against the euro on Tuesday. On Monday the Federal Reserve Bank of New York's Empire state Manufacturing Survey showed its index of business conditions leapt to a record high in November. But the dollar's advance was limited as Wall Street fell for the third straight session on security concerns. "The terror threat remains in the background along with softer equities in general but it's potentially a calmer day than we have seen over the past couple of days which may give the dollar a bit more support," said Mitul Kotecha, senior currency strategist at Credit Agricole Indosuex in London. By 1010 GMT the dollar stood at $1.1761 per euro having fallen to a low near $1.1850 on Monday. The yen held steady at 108.94 per dollar , a yen below last month's three-year peak. Euro zone government bond yields rose a touch alongside U.S. Treasury yields as both markets suffered a bout of profit-taking and fading safe haven attraction. "The renewed terror fears yesterday helped buck the market but today we are unwinding some of the safe haven support we had," said a trader in Helsinki. The two-year Schatz yield was up 1.7 basis points at 2.656 percent. The 10-year Bund yield was up 1.0 basis point at 4.344 percent. Crude oil futures were down 17 cents at $28.88 ahead of U.S. inventory figures with safe-haven gold at $392.10 to $392.60, up from its New York close of $390.75 to $391.50 an ounce.//