(Correct paragraph 15 to show futures losses not gains)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Sept 4 (Reuters) - Global equities hit a new
two-year low on Thursday as central banks in Britain and the
euro zone kept interest rates on hold and a U.S. report pointed
to a deteriorating jobs market.
The dollar steadied against major currencies and Wall Street
looked set for poor start.
MSCI's main world stock index <.MSCI00000PUS> dropped a
quarter of a percent and hit its lowest level since September
2006.
The European Central Bank and Bank of England both left
rates steady at 4.25 percent and 5.0 percent, respectively.
"The ECB just raised rates two months ago, so there is no
way they could have cut rates now. And to raise with the economy
slowing faster than they expected when they raised rates in July
would make no sense either," Bank of America economist Holger
Schmieding said.
Differing economic and rate prospects have been driving the
dollar higher in recent weeks as the U.S.-triggered economic
downturn spreads to the euro zone and Britain.
The dollar stabilised against a basket of major currencies
<.DXY> but was weaker against the pound.
The euro <EUR=> brought $1.4484, roughly unchanged and the
pound <GBP=> fetched $1.7806, a gain of about a third of a
percent.
Britain's currency woes continued, however, as sterling hit
a 12-year low against a trade-weighted basket of currencies
<=GBP> before coming back.
"Sterling still has a downside, data has been poor, and
people are speculating that the BoE will cut rates this year,"
said Paul Robson, strategist at RBS.
"It's the same sterling weakness story from yesterday, the
day before, and for the whole year, as a matter of fact."
STOCK WOES
Downbeat sentiment continued to play on world equity
markets.
The FTSEurofirst 300 index <> of pan-European shares
was down 0.2 percent. Japan's Nikkei average <> earlier
fell 1 percent to a five-month low.
"There are many worrying factors in the market, such as the
global economic outlook and the credit crunch."" said Katsuhiko
Kodama, senior strategist at Toyo Securities.
U.S. stock index futures added to losses after an ADP
Employer Services report showed U.S. private employers cut
33,000 jobs in August.
Oil prices firmed slightly to around $110 a barrel as
traders weighed concerns over slowing demand from major consumer
countries against further hurricane threats to the U.S. oil
sector.
Prices have tumbled by more than $6 since Friday after
Hurricane Gustav, which swept through the major oil-producing
Gulf of Mexico and made landfall near New Orleans on Monday,
turned out to be less destructive than feared.
"There are still concerns over supply issues. A lot of the
Gulf of Mexico capacity was shut down and some refineries are
still closed. We don't know how long they'll remain offline,"
said Gerard Rigby, an analyst at Fuel First Consulting in
Sydney.
Euro zone government bond yields fell.
Two-year Schatz yielded 4.116 percent <EU2YT=RR>, 1 basis
point less than in late Wednesday trade, while 10-year Bund
yields <EU10YT=RR> were about 2 basis points lower at 4.117
percent.
(Additional reporting by Naomi Tajitsu and Emelia
Sithole-Matarise; Editing by Victoria Main)
