* MSCI world equity index down 1.3 pct at 217.55
* Yen hits one-month high against dollar
* Oil drops nearly 3 pct
By Carolyn Cohn
LONDON, April 28 (Reuters) - World stocks and oil fell for a
second day on Tuesday and investors took refuge in the yen as a
report that major U.S. banks may need more capital hit markets
already dropping on fears of a swine flu pandemic.
European stocks and U.S. stock futures fell around 2 percent
and the yen hit a one-month high against the dollar after the
Wall Street Journal said U.S. regulators were pushing Bank of
America <BAC.N> and Citigroup <C.N> to raise more capital
following the initial results of stress tests. []
"While most of the 19 banks that have been tested are
expected to show less negative results, Citi and BofA seem to be
in a shaky situation, prompting investors to pick up the yen on
risk aversion as stocks fell," said Takashi Kudo, a director at
NTT SmartTrade in Tokyo.
The World Health Organization raised its alert level on
swine flu to a phase 4, one step closer to declaring the first
flu pandemic in 40 years.
More countries have reported cases of the flu, and countries
such as Australia and South Korea were testing for the virus.
But so far the deaths have not spread beyond Mexico, where
the outbreak began and 149 people were killed.
"This won't help sentiment, but for now, we're at the
beginning of the outbreak and it's hard to anticipate the impact
on the world economy," said Sebastien Barthelemi, analyst at
Louis Capital Markets in Paris.
"In the short term, airlines, hotel and oil companies are
vulnerable, while drug companies could benefit from the
situation."
The MSCI world equity index <.MIWD00000PUS> fell 1.32
percent to 217.36, extending Monday's losses after seven weeks
of gains, and the FTSEurofirst 300 index <> fell 2.27
percent to 795.35.
Airline stocks were among the hardest hit, with British
Airways <BAY.L> down 5.69 percent.
Futures on the U.S. S&P 500 <SPc1> dropped 1.8 percent.
Emerging market stocks fell 2 percent <.MSCIEF>, with
export-dependent economies seen vulnerable to the spread of
swine flu.
The traditionally safe-haven yen rose around 0.8 percent
against the dollar <JPY=> to 95.85, just off earlier 1-month
highs, and the same amount against the euro <EURJPY=> to 124.85,
close to earlier 7-week highs.
Market players cut back on holdings of riskier
higher-yielding currencies and commodities for a second day,
taking profits on winning bets since the beginning of March that
a global economic recovery was taking root.
Oil fell 2.73 percent to $48.77 a barrel <CLc1> and copper
<MCU3> dropped over 2.5 percent to $4,235 a tonne.
The Mexican peso steadied against the dollar <MXN=>, after
hitting four-week lows. The peso plunged more than 5 percent on
Monday.
Government bonds jumped as equity market losses accelerated.
The June Bund future <FGBLc1> rose 48 ticks to 123.26.
(Additional reporting by Satomi Noguchi in Tokyo and Blaise
Robinson in Paris; Editing by Victoria Main)
