* World stocks fall 0.9 pct after Nikkei sinks 3.6 pct
* Yen rises towards 15-year peak versus dollar
* Bund yields hit record low, US bond yields near 18-mth low
* Swiss franc soars against euro, dollar
By Dominic Lau
LONDON, Aug 31 (Reuters) - World stocks fell on Tuesday in
markets dominated by concerns the U.S. economy is sliding back
into recession, prompting further flows into safe-haven assets.
The yen - a favourite for carry trades at times of economic
stress - hovered back near 15-year high against the dollar after
investors brushed off Japan's attempt to weaken the currency,
yields on benchmark German government bonds hit record highs and
the Swiss franc soared against the euro and dollar.
Mounting U.S. economic concerns likely to keep investors
away from riskier assets and push up the yen, keeping pressure
on Japan to intervene directly in currency markets for the first
time in more than six years.
Crude prices, seen as a proxy for world economic growth,
also came under pressure, and were down 6.6 percent so far in
August and on track for their worst monthly losses since May.
World stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> lost 0.9 percent. The index was also headed
towards its worst monthly performance in three months.
Tokyo's Nikkei average <> shed 3.6 percent, its worst
daily drop in three months, after the Bank of Japan's move the
day before to boost cheap loans to banks failed to curb the
yen's strength.
In Europe, the FTSEurofirst 300 <> index dropped 1.1
percent and the Thomson Reuters Peripheral Eurozone Countries
Index <.TRXFLDPIPU> fell 1.3 percent.
"If you look at all the noise, all the volatility and all
the nervousness, it's clear that this market has one major fear
at the moment and that's the double dip," said Philippe Gijsels,
head of research at BNP Paribas Fortis Global Markets in
Brussels.
"And we are not going to have the answer to that one until
the fourth quarter. There is more downside risk for equities
over the next couple of weeks."
The VDAX-NEW volatility index <.V1XI>, Europe's main
barometer of investor anxiety, rose 3.4 percent. The higher the
volatility index, the lower investors' appetite for risk.
YEN NEAR 15-YR HIGH
The dollar was down 0.4 percent at 84.27 yen <JPY=>, not far
from its 15-year low of 83.58 hit last week. The U.S. currency
fell 2.5 percent against the Japanese currency this month after
sliding 2.2 percent in July.
"Japan's ministry of finance is sending signals that is
willing to intervene but clearly people remember its struggle
with intervention a few years ago," said Simon Derrick, head of
currency research at Bank of New York Mellon.
"If they don't intervene when the yen is at 84, when will
they do it? Once its goes to all time lows? I think their
resolve of staying away from intervention will be tested."
Japanese Finance Minister Yoshihiko Noda repeated on Tuesday
that the government would take decisive action on currencies --
usually seen as code for intervention -- when necessary, but
reaction in the market was limited. The yen has lost more than 9
percent versus the greenback so far this year.
The euro fell 0.5 percent against the yen to 106.65 yen
<EURJPY=R>, crawling towards a nine-year low of 105.44 yen hit
last week.
The single currency also fell to an all-time low against the
Swiss franc, which also hovered close to a seven-month high
against the dollar.
Yields on benchmark 10-year German Bunds <DE10YT=TWEB> hit
record lows at 2.085 percent, while those on 10-year U.S.
Treasuries <US10YT=RR> slipped 2 basis points to 2.5143 percent,
hovering near 18-month low.
In the commodity market, oil <CLc1> lost 1.4 percent to
trade below $74 a barrel, while copper <MCU3> dropped 0.9
percent but was still up 1.3 percent this month.
(Additional reporting by Atul Prakash, Anirban Nag and
William James in London; Editing by John Stonestreet)
