* MSCI world equity index down 0.4 percent at 340.62
* HSBC profit falls as expected
* Oil falls again, dollar steady before Fed rate meeting
By Natsuko Waki
LONDON, Aug 4 (Reuters) - World stocks slipped on Monday as
falling profits at Europe's biggest bank HSBC <HSBA.L> sapped
investor morale in a week when the Federal Reserve and other
major central banks meet to set interest rates.
HSBC's first half profits fell 28 percent, in line with
forecasts, as a $14 billion hit on bad debts on U.S. home loans
and assets writedowns offset strong Asian growth.
None of the central banks in the United States, euro zone,
the UK and Australia is set to change the cost of the borrowing
this week as they face slowing growth due to the credit crisis
and rising price pressures given high energy prices.
However, investors are keen to hear their views on the fresh
market turmoil in July, volatile oil prices and the impact on
the broader economy.
"Interest rates are very important this week," said Angus
Campbell, head of sales at Capital Spreads.
"Their remit is to tackle inflation and not really to look
after the economy as such as a first port of call -- it seems
that the remit is shifting somewhat and there is external
pressure being placed on them in order to keep the economy
afloat."
The FTSEurofirst 300 index <> fell a quarter percent
while the MSCI main world equity index <.MIWD00000PUS> lost 0.4
percent to hit its weakest level in almost a week.
The dollar was steady against a basket of major currencies
<.DXY>, surrendering some gains made on Friday after data showed
U.S. companies cut fewer-than-expected jobs.
U.S. stock futures were down around a quarter percent
<SPc1>, pointing to a weaker open on Wall Street, which sees the
final peak week for second quarter earnings reports.
According to Thomson Reuters data, the second quarter
blended growth rate for S&P 500 firms, which combines actual
numbers for companies that have reported and estimates for
companies yet to report, stands at -20.4 percent.
If this is confirmed as the final rate, it will mark the
first time the S&P 500 has recorded four consecutive quarters of
negative growth since Q2 2001-Q1 2002.
CENTRAL BANKS MEET
Central banks reminded investors last week of their
determination to tackle the one-year-old crisis by extending
emergency lending facilities for investment banks and expanding
other liquidity programmes to ease strains in the money market.
Some analysts say inflation pressures will eventually
subside as high oil prices would weigh on growth, allowing
central banks to cut interest rates to boost the economy.
"While the ECB thus far have been entirely inflation-
focused, we do not believe they will be immune to the weakening
of growth," said Sean Maloney, rate strategist at Nomura.
"This is especially true as our analysis suggests the
inflation peak may well have been achieved ... barring of course
any dramatic upside reversal to oil/food prices."
The Australian dollar rose 0.2 percent against the U.S.
currency <AUD=> after hitting a 3-month low on Friday.
The Aussie has suffered as interest rate expectations
shifted sharply towards a cut, tumbling nearly 3 percent against
the dollar and yen last week for its biggest weekly drop since
the collapse of Bear Stearns investment bank in March.
Emerging sovereign spreads <11EMJ> widened 1 basis point
while emerging stocks <.MSCIEF> fell 0.8 percent.
The September Bund future <FGBLU8> rose 30 ticks with
government bonds drawing safe-haven demand as stocks weakened.
U.S. crude <CLc1> was down half a percent at $124.58 a
barrel, having scored one of the historically steepest falls
from a record high above $147 in July.
But further falls are limited due to supply worries stemming
from concern over Iran's nuclear activities, a tropical storm
that has formed near the Gulf of Mexico and further violence in
OPEC member Nigeria.
Gold <XAU=> tracked oil lower to $902.90 an ounce.
(Additional reporting by Michael Taylor and Emelia
Sithole-Materise; editing by Stephen Nisbet)
