* MSCI world equity index down 0.16 percent at 219.82
* Euro up, but near one-month low vs dollar
* Bond yield spreads within euro zone near record wides
By Natsuko Waki
LONDON, Jan 14 (Reuters) - European shares fell and Wall
Street was set for a weaker open on Wednesday as concerns about
the banking sector weighed, while worries about the euro zone
economy kept the euro near a one-month low against the dollar.
Deutsche Bank <DBKGn.DE> tumbled 9 percent after saying it
has racked up a loss of about 4.8 billion euros in the final
three months of 2008. HSBC <HSBA.L> hit a seven-year low after
Morgan Stanley analysts said it may need to raise up to $30
billion in a rights issue.
Data showed Germany's economy grew at its slowest pace in
three years in 2008, with the economy contracting by between
1.5-2.0 percent in the final three months.
"In the first week of the year, people forgot about banks'
woes for a moment. But now they are back in the spotlight," said
Pascal Decque, analyst at Natixis in Paris.
MSCI world equity index was down 0.16 percent. The
FTSEurofirst 300 <> index of top European shares was down
1.6 percent. U.S. stock futures were down around 0.9 percent
<SPc1>, pointing to a weaker open on Wall Street.
Equity investors have struggled to keep a year-end rally
going, battered by worries about the state of the global economy
and uncertainty about the impact of numerous government
anti-recession proposals.
They have, however, settled into something of a trading
range with global stocks some 15 to 20 percent above a low
reached last November.
"It is still a market driven between hope and fear. On the
one hand you have the stimulus packages, (U.S. President-elect
Barack) Obama getting into office next week and the ECB
hopefully cutting again tomorrow," said Philippe Gijsels,
strategist at Fortis Bank.
"On the other hand you continue to have dismal economic
figures and the start of the earnings season which could see
companies disappointing."
Crude <CLc1> rose 2.4 percent to $38.70 a barrel. OPEC kept
up its talk of production cuts, and as a cold snap in the United
States boosted heating oil demand.
EURO ZONE GOVERNMENT WORRIES
The euro was up 0.3 percent at $1.3232 <EUR=>, having hit a
one-month low on Tuesday.
The single currency came under pressure ahead of a
widely-expected interest rate cut from the European Central Bank
later in the week and a slew of sovereign ratings downgrade
warnings in the region.
The ECB is widely expected to cut rates by 50 basis points
from the current 2.5 percent to help fight a broad economic
downturn. []
Spain and Portugal became the third and fourth euro zone
countries since last week to be warned by ratings agency
Standard & poor's that their credit rating is under threat from
the financial crisis
Last week, S&P put Greece's sovereign rating on negative
watch and cut Ireland's ratings outlook to negative from stable.
The Portuguese 10-year government bond yield spread hit its
widest against benchmark German Bunds since the euro's 1999
launch, hitting 114.7 basis points -- the widest since
at least 1999, according to Reuters data.
The Irish/Bund spread widened to 180 basis points.
Irish Prime Minister Brian Cowen said he agreed with the
view that the country's public finances are unsustainable.
However, he denied a report by Irish public broadcaster RTE that
he had said IMF help may be needed if Ireland's economic
downturn worsened.
The dollar was down 0.3 percent against a basket of major
currencies <.DXY>. The March bund future <FGBLc1> was down 11
ticks.
(Additional reporting by Blaise Robinson and Joanne Frearson;
Editing by Victoria Main)
