* Global outlook darkens, Japan factory output plunges
* World stocks fall for second straight session, Nikkei hit
* Dollar, yen lifted by renewed flight to safety
(Recasts, updates prices, changes byline, previous HONG KONG)
By Ian Chua
LONDON, Jan 30 (Reuters) - Fresh signs of a deepening global
recession knocked world stocks lower for a second straight day
on Friday but European bourses managed to find a steadier
footing after reversing early losses.
Appetite for riskier assets, however, remained firmly on the
back foot, helping to drive the low-yielding yen and dollar
broadly higher and giving less risky assets such as U.S.
Treasuries a bit of a lift.
Copper <MCU3=LX>, a key barometer of economic activity,
extended its fall after Thursday's nearly 3 percent slide. It
was down 0.3 percent.
"It seems like everywhere you turn there is a frightful
batch of data," said Phyllis Papadavid, currency strategist at
SG in London. "I think it's a confirmation of what we've been
concerned about in terms of the pace of the downturn in the
global economy and clearly the FX market is reacting to it."
World stocks, as measured by MSCI's all-country index
<.MIWD00000PUS> fell 0.5 percent, following a 2 percent fall on
Thursday.
Wall Street shares dived on Thursday after a report said
continuing claims for U.S. unemployment benefit were at a record
high, while Japanese stocks <> fell 3 percent on Friday
after the world's second biggest economy posted a record 9.6
percent drop in industrial production for December.
European bourses, which opened lower, reversed direction to
be slightly firmer in early trade. The FTSEurofirst 300 index
<> of top European stocks climbed about 0.9 percent.
Delivering a speck of encouraging news late on Thursday,
Internet retailer Amazon.com Inc <AMZN.O> reported a
surprisingly strong quarterly profit. See [].
YEN, DOLLAR UP AGAIN
In the currency markets, the euro fell 0.6 percent against
the dollar to $1.2877 <EUR=> and the common currency was down
1.2 percent versus the Japanese currency at 115.19 yen
<EURJPY=>.
Against a basket of major currencies, the dollar <.DXY> put
on 0.2 percent.
"We have fallen back into the well trodden path where weak
U.S. data drives the market only in regard to its impact on the
rest of the world, rather than what it might say about the state
of the U.S. economy," said Stuart Bennett, senior forex
strategist at Calyon.
"Hence, whilst the U.S. numbers disappoint, helping to push
equity markets lower, the FX market gets rattled and races
toward its favoured U.S. dollar and Japanese yen safe havens."
The New Zealand dollar, once favoured by investors because
of its high yield, dropped to a six-year low of $0.5077 <NZD=D4>
after the country's central bank governor said interest rates
will probably have to be cut further, a day after they were
slashed by 150 basis points.
Weakness in global equity markets offered some support to
U.S. Treasuries. The yield on the benchmark 10-year note
<US10YT=RR>, which moves in the opposite direction of the price,
slipped 3.4 basis points on the day to 2.835 percent.
However, the yield was up around 60 basis points in January,
the biggest one-month rise since April 2004, with investors
concerned about the amount of new borrowing needed to finance
the government's rescue plans.
Persistent worries about mounting debt issuance from
governments weighed on euro zone government bonds, pushing
yields higher. The 10-year yield <EU10YT=RR> edged up 4.9 basis
points to 3.297 percent.
Optimism earlier this week after the U.S. Congress
progressed on a $825 billion stimulus spending package and other
efforts to ease the blow of the severe recession seemed to have
evaporated as the White House plan is expected to face
formidable opposition in the Senate.
(Additional reporting by Veronica Brown in LONDON and Kevin
Plumberg in HONG KONG; editing by David Stamp)
