* MSCI world equity index down 1.2 pct at 279.80
* European shares hit four-week lows, banking worries weigh
* Dollar hits one-month high ahead of Fed meeting
By Natsuko Waki
LONDON, Nov 3 (Reuters) - World stocks hit a four-week low
on Tuesday and the dollar climbed as poor results from UBS
<UBSN.VS> and a shake-up of UK banks Lloyds <LLOY.L> and Royal
Bank of Scotland <RBS.L> prompted investors to cut back on risk.
UBS shares fell nearly 8 percent after the bank reported
larger-than-expected asset outflows for the third quarter.
[]
Lloyds fell 1 percent after launching a record 13.5 billion
pound ($22 billion) rights issue. Along with RBS, it agreed to
sell off businesses as part of a complex deal to limit reliance
on government support. []
Adding to the sector's problems, the European Commission
said results of stress tests on euro zone banks showed losses
could amount to 400 billion euros ($590.9 billion) in 2009-2010.
[]
Furthermore, CIT Group INC <CIT.N>, a U.S. lender to
hundreds and thousands of small and medium-sized businesses,
filed for bankruptcy on Sunday, underscoring the fragility of
parts of the financial sector and fanned concerns that a 7-month
global equity rally may be reversing.
"There is a general sense of risk aversion," said Geoffrey
Yu, currency strategist at UBS.
"Year-end position liquidation could also prove disruptive
to capital markets as investors crystallise this year's gains."
World stocks as measured by MSCI <.MIWD00000PUS> fell 1.2
percent. The index rallied by 75 percent between early March and
late Oct on growing optimism over the global economy, but fell 4
percent last week.
The FTSEurofirst 300 <> index of top European shares
fell nearly 2 percent to a four-week low, losing ground for the
sixth time in nine sessions.
Riskier emerging market shares <.MSCIEF> fell 1.8 percent.
"UBS just posted ugly results that bode ill for European
bank results and CIT just filed for bankruptcy. This raises the
question: isn't it too early to pay back government money?" said
David Thebault, head of quantitative sales trading at Global
Equities in Paris.
European bank shares <.SX7P> shed 3.8 percent.
C.BANKS, G20 MEETINGS
The low-yielding dollar rose 0.6 percent against a basket of
major currencies <.DXY> and also advanced 0.9 percent to a
four-week high of $1.4627 per euro <EUR=>.
The Federal Reserve starts a two-day meeting on interest
rates on Tuesday, the European Central Bank and Bank of England
make rate decisions on Thursday, U.S. employment data is due on
Friday and G20 finance ministers meet in St Andrews, Scotland,
this weekend.
The Fed is not expected to depart from a policy of
maintaining low rates for an extended period of time but it
could discuss how to prepare markets for an eventual policy
shift.
The ECB and BoE are expected to keep rates on hold but the
UK central bank may decide to pump yet more money into the
economy.
The Australian dollar <AUD=> fell more than 1 percent after
the country's central bank raised rates on Tuesday for a second
consecutive month, to 3.5 percent.
Investors are becoming more tentative about markets going
into the final two months of the year.
Oil fell 1.2 percent to $77.18 a barrel <CLc1> but gold
<XAU=> was boosted by news the International Monetary Fund had
sold 200 tonnes of gold to the Reserve Bank of India for $6.8
billion, half of a long-planned sale that threatened to slow the
precious metal's rally. []
Euro zone government bonds benefited from the fall in
European stocks. The December Bund future <FGBLc1> rose 37 ticks
to 122.28.
(Additional reporting by Tamawa Desai, editing by Mike Peacock)
