* MSCI world equity index down 1 pct at 211.58
* Banking stocks lead losses; yen rallies across the board
* Government bonds surge; JGB futures hit 4-month high
By Natsuko Waki
LONDON, Jan 15 (Reuters) - World stocks hit a one-month low
on Thursday while the yen rallied and Japanese bond futures rose
to their highest since Lehman Brothers collapsed in September as
concerns grew over the banking sector and the broader economy.
U.S. stocks hit a six-week low on Wednesday, with Bank of
America <BAC.N> and Citigroup <C.N> plunging as investors
questioned whether the firms have enough capital to cover losses
from toxic assets.
Technology bellwether Apple <AAPL.O> tumbled after the firm
said its chief executive Steve Jobs will take medical leave of
absence until June.
Expectations for a euro zone interest rate cut later in the
day offered little help as investors grew nervous about the
scale of losses banks and other firms might unveil in their
fourth-quarter earnings reports.
"It is looking bleak today and not a very nice picture. We
are going into the Q4 reporting season so investors are nervous
anyway," said Bernard McAlinden, market strategist at NCB
Stockbrokers.
MSCI world equity index <.MIWD00000PUS> fell more than 1
percent to hit its lowest since early December. The FTSEurofirst
300 index of leading European shares fell 0.8 percent <>.
Barclays <BARC.L> was the major loser in Europe, falling
more than 7 percent. Emerging stocks <.MSCIEF> fell 3.4 percent.
SURGING BONDS
March 10-year JGB futures rose to 140.19 <2JGBv1>, the
highest for a lead contract since Sept. 16, when JGBs jumped on
safe-haven buying and futures soared by their daily limit of 3
full points in wake of the collapse of Lehman Brothers.
The March bund future <FGBLc1> was up 36 ticks, having hit a
new contract high earlier in the session.
The ECB is widely expected to lower its benchmark target
rate by 50 basis points to 2.0 percent.
"I don't think anyone is looking for anything too aggressive
but it's more what he (ECB President Jean-Claude Trichet) says
about the outlook going forward that is going to set the tone
for now," a trader in London said.
Peripheral euro zone government debt remained under pressure
a day after ratings agency Standard & Poor's cut Greece's credit
ratings and warned on Portugal's credit worthiness while its
peer Moody's said it was reviewing triple-A sovereigns.
S&P recently said Spain, Portugal, Greece and Ireland's
credit ratings were under threat as the global economic crisis
strained public finances, but the rating agency affirmed those
of Germany, France, Italy, Belgium and The Netherlands.
The low-yielding yen rallied across the board. The euro hit
a 6-week low of 116.45 yen <EURJPY=> while the dollar hit a
4-week low of 88.49 yen <JPY=>. The dollar <.DXY> against a
basket of major currencies fell 0.1 percent.
Crude oil prices extended losses, making it easier for
central banks' to cut interest rates because of its benign
effect on inflation.
U.S. light crude for February delivery <CLc1> was down 67
cents at $36.61 a barrel, having earlier fallen by as much as
$1.15.
Oil was $147 a barrel in July but has toppled as the
economic crisis has sliced into global energy demand. World
consumption is now projected to drop by more than 800,000
barrels per day this year.
(Additional reporting by Blaise Robinson and Emelia
Sithole-Materise)
