* MSCI world equity index down 0.9 percent at 232.44
* Japan rate cut fails to ease global economy concerns
* Low-yielding yen and dollar surge; oil falls over 3 pct
(Changes byline, adds quotes, updates prices)
By Veronica Brown
LONDON, Oct 31 (Reuters) - Shares in Asia and Europe fell on
Friday, heading for their worst month ever, while the
low-yielding yen shot up as Japan's interest rate cut failed to
quell concerns about the deteriorating global economic outlook.
The Bank of Japan joined a global easing cycle by trimming
interest rates by 20 basis points to 0.3 percent, but
disappointed many who had expected a bigger quarter point cut.
The move followed the Federal Reserve's decision to cut
interest rates to 1 percent this week -- its lowest level since
June 2004 -- to stave off a prolonged recession.
The euro zone, Australia and Britain are expected to follow
suit next week.
However, investors feared a round of rate cuts was not
enough to stem the flow of worsening corporate earnings and
bolster consumer consumption in major economies which might be
already in recession.
In response, oil and commodities fell sharply.
"The road ahead still looks long and steep," said Keith
Bowman, equity analyst at Hargreaves Lansdown in London.
"A relatively deep global recession could require further
capital raising, with banks on this occasion going into a
downturn in relatively poor shape," he added.
MSCI world equity index <.MIWD00000PUS> fell 0.9 percent.
The index has fallen 21 percent this month, on track for its
worst monthly performance in the index's 20-year history.
Asian stocks ticked lower, while European shares <>
were down 0.9 percent. Both indexes also headed for their worst
month ever.
U.S. crude oil <CLc1> fell 3.6 percent to $63.58 a barrel,
down some 55 percent from its record high around $147 set in
July. Gold <XAU=> fell to $724.10 an ounce and was set for its
largest monthly fall in more than 30 years.
Emerging stocks <.MSCIEF> rose more than 1 percent. The
December Bund future <FGBLc1> was slightly higher.
YEN, DOLLAR REIGNITED
The dollar fell more than 1 percent against the yen to 97.45
yen <JPY=> but held well above 13-year lows seen at 90.90 yen
earlier this month, while the euro dropped 2.6 percent on the
day to 123.95 yen <EURJPY=> even as the BOJ cut interest rates.
Risk-averse investors ran towards the low-yielding Japanese
currency in droves, with the dollar also reaping the benefits of
renewed deleveraging. The dollar <.DXY> rose 1.3 percent against
a basket of major currencies.
Although the yen's most recent leg higher is still some way
off levels that galvanised the Group of Seven to issue a warning
about excessive volatility in the yen earlier this week, options
markets are still showing implied volatility at crisis levels
<JPY1MO=>.
"I don't think for a second we can say we've seen the low in
dollar/yen for this broader move, so once we retest that clearly
there's an ongoing threat of intervention," UBS senior FX
strategist Geoff Kendrick said.
(Additional reporting by Natsuko Waki in London and Tyler Sitte
in Frankfurt; Editing by Mike Peacock)
