World stocks bounced off this week's 3-1/2 month low on Thursday and credit markets stabilized as upbeat corporate earnings tempered worries about a global credit crunch which had prompted a sell-off of almost a fortnight.

Shares and high-yielding currencies had been sold on jitters that a spillover from the troubled U.S. housing market would trigger a global credit squeeze, hurt corporate earnings and hit otherwise robust global growth.

But on Thursday, investors chose to focus on upbeat corporate fundamentals with banking shares outperforming in Europe after strong results from Societe Generale.

Asian stocks ended higher and U.S. stock futures pointed to a firmer open on Wall Street, which was also helped by a fall in oil prices.

The arguments for equities -- positive results and attractive valuations -- are still in place, said Mark Bon, fund manager at Canada Life.

Arthur Hogan, chief market analyst at Jefferies & Co in Boston, said: A positive catalyst is the significant pullback in the price of oil... we may get some relief. But volatility will be the norm, not the exception.

MSCI's main world equity index was up 0.3 percent after falling 7 percent from its July lifetime peak to a low on Wednesday.

MSCI's measure of Asia Pacific stocks excluding Japan ended up 0.5 percent. The FTSEurofirst 300 index was up 0.9 percent. The index is off its 6-1/2 year high in July but still up 3 percent since January.

VOLATILITY AHEAD

As investors weigh gloomy credit stories and strong corporate and economic fundamentals, equities, currencies and other global markets are set to experience more sharp swings.

The market still doesn't seem to have made up its mind if there is a more protracted issue here that would force a further unwind of the carry trade, said Trevor Dinmore, head of FX strategy at Deutsche Bank.

The iTraxx Crossover index, a widely-watched gauge for European credit market sentiment, tightened sharply to 390 basis points after widening briefly above 500 bps earlier this week.

Even if financial markets are calming, volatility threatens to end the easy financing of corporate takeover deals, which has been a key factor behind a four-year stock market boom.

Public sector software provider Civica said buyout talks with a private equity firm had collapsed due to uncertainty in the debt market.

Baring Asset Management estimate that 13 corporate loan or bond deals, representing $43 billion, have been postponed or reduced. It also estimated the amount of incomplete cash-financed leverage and management buyouts sitting on bank balance sheets was at around $400 billion.

Euro zone government bond were lower with the September Bund future down 25 ticks. Citi's global bond yield fell below 3.7 percent for the first time since May.

Goldman Sachs noted U.S. and other interest rates markets have so far failed to break the lows in yield set during turbulences in February-March, suggesting that the market is not pricing in a material damage to the economy.

Central banks in the euro zone and Britain left interest rates on hold. The European Central Bank is to hold a news conference later where it might signal a September rate hike.

The yen came off its four-month high set against the dollar on Wednesday, holding steady on the day.

Oil prices fell with U.S. light crude for September delivery down 0.3 percent after hitting a record high on Wednesday. Gold edged higher to $666.55 an ounce.

Japan Investment Citigroup