* MSCI world equity index steady at 284.17
* Sterling slips after King, euro lower after ZEW
* Oil rises; government bonds fall
By Natsuko Waki
LONDON, Sept 15 (Reuters) - World stocks held steady on
Tuesday ahead of U.S. data, while sterling fell broadly after
the Bank of England Governor said the central bank was looking
at cutting the remuneration rate on commercial banks' reserves.
The euro also slipped briefly after the closely-watched ZEW
survey showed a smaller-than-expected improvement in German
investor morale.
A year after Lehman Brothers collapsed, risky assets are
almost back at September 2008 levels and some G7 economies have
come out of recession.
U.S. data later in the day, including retail sales and a
regional manufacturing survey, is expected to reinforce
expectations the world's biggest economy is recovering.
The ZEW's expectations index for Germany rose 57.7 from 56.1
in August, reaching its highest since April 2006, although
economists had expected a bigger rise.
Given a sharp rise in stocks -- with world stocks rising 65
percent since March -- investors are reluctant to add more
exposure to risky assets.
"The general feeling is this is the point in the cycle where
investors want to take a pause, before deciding which way they
want to jump," said Peter Dixon, economist at Commerzbank.
"Do they want to jump on good news or sell off on the back
of the belief the rise has gone too far. At the moment I think
the two forces are roughly balancing each other out."
The MSCI world equity index <.MIWD00000PUS> was steady on
the day, having hit an 11-month high last week. The FTSEurofirst
300 index <> was broadly unchanged on the day, while U.S.
stock futures <SPc2> were pointing to a slightly weaker open on
Wall Street later.
"Investors have been moving money out of cash, which is
basically returning 0 percent, and into other asset classes.
This trend still has a way to go, which should provide a
tailwind for the markets as well," Bob Doll, chief investment
officer for global equities at BlackRock, said in a note to
clients.
"Additionally, reasonable valuations, improving corporate
profits and discipline around capital expenditures are all
positives. Markets remain unpredictable, and a correction could
still occur at any point, but we believe the path of least
resistance continues to be up."
Shares fell briefly on Monday after China responded swiftly
to a U.S. decision to impose special duties on Chinese tires,
creating tensions ahead of a summit of G20 leaders next week.
A trade war is potentially detrimental to the global economy
which is just recovering from the worst recession in decades.
China is a key buyer of U.S. Treasuries and escalating tensions
may damage the dollar.
Emerging stocks <.MSCIEF> rose 0.8 percent. U.S. crude oil
<CLc1> rose 0.6 percent to $69.26 a barrel.
BOE TOOLKIT
British interest rate futures <0#FSS> rallied and sterling
hit a four-month low of 88.71 pence per euro <GBP=> after the
BoE's Mervyn King said it would be "sensible" to cut the rate at
which banks reserves are remunerated, and it was something the
central bank was looking at. []
Such an option, first discussed by the BoE in August, would
provide an disincentive for banks to hoard cash with the central
bank, encouraging them to lend to the private sector.
King's statement fuelled speculation the BoE may use yet
another device in its quantitative easing toolkit after
increasing the amount of domestic assets it buys from the market
to boost liquidity last month.
Elsewhere, the dollar rose 0.1 percent against a basket of
major currencies <.DXY> while it rose 0.3 percent to 91.17 yen
<JPY=>, having hit a seven-month low on Monday.
The September bund future <FGBLc1> fell 25 ticks.
(Additional reporting by Joanne Frearson and Naomi Tajitsu;
editing by Chris Pizzey)
