By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 27 (Reuters) - World stocks hovered around
two-year lows on Wednesday with losses in Europe and Japan while
oil climbed for the third day in a row and the dollar slipped
back from recent highs.
Earnings concerns, worries about banking stress, Western
tensions with Russia over Georgia all weighed and a gloomy
outlook for the world economy are all weighing on sentiment.
But there was little specific to drive assets on Wednesday.
One Japanese stock analyst said his market was simply being
"pulled down by gravity".
MSCI's main gauge of world stocks <.MIWD00000PUS> was up
slightly as emerging market shares rose, but still trading
around a two-year low.
It has lost more than 17 percent so far this year, on track
for one of its worst annual performances in more than 20 years.
European shares fell as weaker banking stocks outweighed the
impact of energy shares that gained on a rise in crude prices.
The FTSEurofirst index <> of pan-European shares was down
0.4 percent having gained the same in the previous session.
"Financials have been under a little bit of pressure," said
Henk Potts, equity strategist at Barclays Stockbrokers.
Earlier, Japan's Nikkei average <> dipped 0.2 percent
led lower by exporters such as Honda <7267.T> and property
shares which dropped after the collapse of another builder.
Sohken Homes <8911.T> filed for protection from creditors
with 33.8 billion yen ($308 million) in debt, the latest in a
string of collapses in the property and construction sectors.
GUSTAV LIFTS OIL, DOLLAR SLIPS
Barclays' Potts said stock investors were still concerned
about the high price of oil and its effect on inflation and
sentiment despite the price of crude now being well off its
recent, all-time highs.
Oil rose for a third straight session, above $117 a barrel,
on worries that Tropical Storm Gustav will threaten oil and
natural gas installations in the Gulf of Mexico.
Crude for October delivery <CLc1> rose 83 cents to $117.10 a
barrel, after settling up $1.16 on Tuesday.
Gustav was downgraded to a tropical storm on Wednesday after
it slammed into Haiti on Tuesday, but forecasters expect wind
speeds to regain hurricane force, and it could be the first
major storm to threaten oil and gas production in the Gulf of
Mexico since 2005 [].
The dollar eased back as dealers cashed in on the currency's
jump the previous session to 2008 highs against a basket of
currencies.
The rebound in oil prices, as well as persistent concern
about the U.S. economy and banking system, also helped trigger
the bout of profit-taking.
"The dollar seems to have checked its advance," said
Geoffrey Yu, currency strategist at UBS in London. "Investors
are finding it hard to find reasons to get into the dollar and
chase this move further (right now)."
The euro was up half a percent on the day at $1.4730 <EUR=>,
bouncing back from a six-month low the previous session of
$1.4570 on trading platform EBS.
The dollar index, a measure of the greenback's value against
six major currencies, fell half a percent on the day to 76.84
<.DXY>, having hit a 2008 high on Tuesday at 77.619.
Euro zone government bond yields were steady after rallying
in after-hours trading the previous session on signs from the
U.S. Federal Reserve that rates will stay on hold.
Minutes from the Federal Open Market Committee's August
meeting showed Federal Reserve policymakers saw a weakening
economic outlook and financial market stress outweighing
persistent concerns about inflation.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR>
was down 0.2 basis points at 3.962 percent, while the 10-year
Bund <EU10YT=RR> was flat at 4.107 percent.
(Additional reporting by Jamie McGeever)
