* MSCI world equity index down 0.24 pct at 305.97
* Emerging market stocks at highest since June 2008
* Euro briefly hits 6-1/2 mth high; oil slips
By Natsuko Waki
LONDON, Oct 4 (Reuters) - Equity markets in developed
economies fell across the board on Monday as investors remained
wary of an economic slowdown, while stocks in buoyant emerging
market economies hit their highest since June 2008.
The euro briefly touched a 6-1/2 month high against the
dollar after China pledged on Sunday to support a stable euro
and not reduce its holdings of European government bonds.
[] But the dollar later bounced back versus the
euro and was up against a basket of currencies, pressuring oil
prices and other dollar-priced commodities.
Extending a theme of the past few weeks, investors sought
high-yielding assets in emerging economies as a sluggish
recovery in some advanced economies, especially the United
States, encourage central banks to keep borrowing costs low.
"On the one hand people are very nervous about the economy,
but on the other hand you don't want to be too negative and too
short either because you know that (Federal Reserve Chairman
Ben) Bernanke is there," said Philippe Gijsels, head of research
at BNP Paribas Fortis Global Markets in Brussels.
"Eventually he will put more money once again into the
system... But I see more risk to the downside for the market
than the upside at the moment."
Developed market stocks <.MIWO00000PUS> fell 0.3 percent
while emerging market stocks <.MSCIEF> rose a third of a
percent, hitting its highest in more than two years.
MSCI world equity index <.MIWD00000PUS> and the Thomson
Reuters global stock index <.TRXFLDGLPU> fell around a quarter
percent. The FTSEurofirst 300 index <> lost two-thirds of
a percent.
U.S. stock futures were down half a percent <SPc1>,
indicating a weaker open on Wall Street later.
U.S. crude oil <CLc1> fell 0.8 percent to $80.93 a barrel.
The bund futures <FGBLc1> rose 48 ticks.
The dollar <.DXY> rose half a percent against a basket of
major currencies, while the euro lost 0.9 percent to $1.3668
<EUR=>, having risen above $1.3800 for the first time since
mid-March.
The yen was steady at 83.23 per dollar <JPY=> ahead of a
Bank of Japan monetary policy decision on Tuesday.
With developed economies set to inject more liquidity into
the system, flows into emerging economies are likely to increase
further, putting upward pressure on emerging currencies.
"This should be seen as another key element of the global
rebalancing process, as one of the implicit aims of liquidity
injections by the core G4 is surely to facilitate a weakening of
their currencies," JP Morgan Asset Management said in a note to
clients.
"In such an environment, policymakers' reactions in the
developing world will likely be an important dynamic to monitor,
as they have implications for the future path of global
inflation."
Inflows into emerging market funds are already on track to
set a record this year, according to latest data from EPFR
Global. []
Financial leaders gather for an International Monetary Fund
meeting this week, and the concept of countries keeping their
currencies weak for export gains is likely to be a hot topic.
[]
(Additional reporting by Atul Prakash)
