* MSCI world equity index down 0.04 pct at 334.17
* Sterling hits 12-year low on trade-weighted basis
* European stocks weaker on financials; oil rises
* Euro rises after ECB squashes rate cut expectations
By Sebastian Tong
LONDON, Aug 28 (Reuters) - Weak UK housing data knocked
sterling to a 12-year low on Thursday, weighing on European
stocks already under pressure as oil prices edged up on supply
concerns over a brewing tropical storm in the Gulf of Mexico.
Rising fuel costs compounded investor worries over the
global economy even as the euro advanced further from Tuesday's
six-month low against the dollar on the back of hawkish comments
by euro zone central bankers.
August data showing the biggest annual drop in British house
prices since 1991 sent sterling to its lowest level on a
trade-weighted basis <=GBP> since October 1996 and close to a
record low against the euro <EURGBP=>. []
"The (UK) housing market downturn seems to be gathering pace
which delivers a further blow to consumer spending as the wealth
accumulation from the housing market dries up," said Adam Cole,
global head of foreign exchange strategy at RBC Capital Markets.
Signs of the global economic slowdown was evident elsewhere
with Toyota Motor Corp <7203.T>, the world's biggest automaker,
cutting its 2008 sales forecast by nearly 7 percent. []
Asian stocks continued to languish around two-year lows
while the MSCI main world equity index <.MIWD00000PUS> remained
flat. Emerging stocks <.MSCIEF> dipped 0.4 percent.
GLOOM AND GUSTAV
Quarterly results are also doing little to dispel the gloom
among investors.
Swiss Life <SLHN.VX>, one of Europe's top 10 life insurers
by market value, issued a profit warning after unveiling a
smaller-than-expected first-half net profit. French group Credit
Agricole <CAGR.PA> posted a 94-percent fall in Q2 profit.
The FTSEurofirst 300 index <> of top European stocks
was 0.64 percent down at 1,166.16, with financial shares
underperforming.
Fears that U.S. energy production could be hit by brewing
Tropical Storm Gustav -- expected to reach the U.S. Gulf Coast
on Monday -- sent U.S. crude <CLc1> higher for the fourth day in
a row.
Oil, which has trended down since hitting a record high of
$147.27 on July 11, briefly pushed above $119 a barrel before
retreating to stand 0.6 percent higher on the day.
If Gustav develops into a major hurricane, it would be the
first to threaten U.S. energy installations in the area since
Katrina and Rita in 2005.
Higher oil, coupled with firmer gold prices <XAU=>, saw the
the dollar <.DXY> soften 0.3 percent against a basket of major
currencies.
The euro held its ground against the dollar <EUR=> to rise
0.36 percent, emboldened after European Central Bank
policymakers on Wednesday doused speculation that slowing growth
and easing commodity prices would spur them to cut interest
rates. []
"We saw a wealth of hawkish comments from the ECB yesterday
and that has done something to scotch some of the near-term
expectations for rate cuts. People are suddenly realising that
they may have become overly excited about a rate cut," said
David Page, economist at Investec.
The September Bund future <FGBLU8> was 18 ticks higher at
114.28 while emerging sovereign spreads <11EMJ> narrowed 3 basis
points to trade at 307 bps over U.S. Treasuries.
(Additional reporting by Simon Falush and Naomi Tajitsu;
Editing by Victoria Main)
