* MSCI world equity index down 0.8 pct at 330.30
* Economic worries drive oil, stocks, European FX lower
* Dollar hits 11-month high, government bonds firm
By Natsuko Waki
LONDON, Sept 3 (Reuters) - Fears over the slowing global
economy hit financial markets on Wednesday, knocking oil below
$108 a barrel, pushing world stocks lower and lifting the dollar
to 11-month peaks.
U.S. crude oil prices <CLc1> fell 1.5 percent to $107.99 a
barrel, nearly $40 below their July record peak, as weakening
Hurricane Gustav shifted investors' focus back to the softening
in energy demand caused by the slowing global economy.
World stocks fell towards last month's two-year trough,
while emerging market stocks hit a 17-month low as lower
commodity prices weighed on resource stocks. Safe-haven
government bonds gained as inflation worries eased.
"We're seeing a continuation of the trend where sentiment on
the rest of the world is deteriorating while sentiment in the
U.S. is improving albeit from a very low base, and the dollar is
outperforming as a result," RBC head of FX strategy Adam Cole
said.
The dollar <.DXY> was up half 0.6 percent against a basket
of major currencies after hitting an 11-month peak while the
euro fell to an eight-month low of $1.4386 <EUR=>.
The FTSEurofirst 300 index <> fell 1.4 percent while
the MSCI main world equity index <.MIWD00000PUS> fell 0.7
percent, adding to a loss of 2.4 percent in August.
Reflecting the broad decline in commodities, the
Reuters-Jefferies benchmark index of commodity futures <.CRB>
fell on Tuesday to its lowest since February 2008.
On Tuesday, hedge fund Ospraie Management -- in which Lehman
Brothers <LEH.N> took a 20 percent stake in 2005 -- said it will
close its flagship fund after it plunged 27 percent in August on
losses in energy, mining and natural resources equity holdings.
That would be one of the biggest ever closures of a
commodities-focused hedge fund.
Lehman shares, traded in Frankfurt, were down 3 percent
<LHMH.F>. U.S. stock futures <SPc1> were pointing to a weaker
open on Wall Street later.
"The last thing Lehman needs while they are looking to raise
new capital is to have skeletons like this falling out of the
closet. There's a clear possibility that this could impede the
process of getting new investors in," said Arthur Hogan, chief
market analyst at Jefferies & Co in Boston.
EUROPEAN, EMERGING MISERY
Adding to the evidence of a slowing economy, data confirmed
that the euro zone's economy shrank in the second quarter,
moving half way into recession -- technically defined as two
consecutive quarters of negative growth.
Separate data also confirmed that the euro zone's service
sector shrank in August.
Sterling extended its relentless decline with the
trade-weighted index hitting a 12-year low <=GBP> for an eight
straight session and slumping to a 2-1/2 year low of $1.7669.
The British currency has been under pressure as a series of
weak data reinforced expectations that the economy is on the
brink of recession, fanning expectations of an interest rate cut
by the year end.
Emerging sovereign spreads <11EMJ> widened 5 basis points to
trade 312 bps over U.S. Treasuries, their widest in three years.
Emerging stocks <.MSCIEF> fell 1.2 percent to their lowest
level since March 2007.
The September Bund future <FGBLU8> rose 36 ticks as
investors bought into safe-haven government bonds.
Gold <XAU=> slipped below $800 an ounce, tracking oil lower
to hit a session low of $798.90.
(Additional reporting by Veronica Brown, editing by Swaha
Pattanaik)
