* MSCI world equity index down 2 pct at 327.54
* Japan stocks fall 14 pct at one point on nuclear fears
* Oil down 2 percent; Bunds, yen rise broadly
By Natsuko Waki
LONDON, March 15 (Reuters) - World stocks hit 2-1/2 month
lows on Tuesday and oil fell and the yen surged after reports of
rising radiation near Tokyo triggered a 10 percent fall in
Japanese stocks, hurting risky assets across the board.
German government bonds and the low-yielding dollar were the
biggest beneficiaries of increased risk aversion while a measure
of European equity volatility surged to an 8-1/2 month high.
Tokyo stocks fell 14 percent at one point before posting
their worst two-day losing streak since 1987 after Japan said
the risk of nuclear contamination was rising. []
Japanese bond yields rose as investors sold debt to offset
equity losses and concerns rose the country, already saddled
with public debt double the size of its gross economic output,
may issue even more government bonds to fund quake relief.
"The market will do its best to price in the worst case
scenario and we will move forward from there. But the situation
is very fluid and changing from hour to hour," said Keith
Bowman, equity analyst at Hargreaves Lansdown.
"The Japanese funds have a considerable amount of foreign
debt and there are concerns that events may cause them to sell
some of their debt and repatriate the funds back home."
The MSCI world equity index <.MIWD00000PUS> fell 2 percent,
hitting its lowest since mid-December. The index has erased all
of this year's gains, and is now down 0.7 percent since January.
The Thomson Reuters global stock index <.TRXFLDGLPU> fell
2.1 percent. The Nikkei 225 index fell 10.6 percent while the
broader TOPIX index fell 16.3 percent this week, the worst
two-day losing streak since October 1987.
"The downside is completely open-ended at the moment as
headlines come through," said Roland Randall, strategist at TD
Securities in Singapore.
The FTSEurofirst 300 index <> fell 2.7 percent while
emerging stocks <.MSCIEF> were down 2 percent.
The VDAX-NEW volatility index <.V1XI>, one of Europe's main
barometers of anxiety, surged 18 percent on Tuesday, hitting its
highest level in 8-1/2 months. []
The higher the volatility index, based on sell- and
buy-options on Frankfurt's top-30 stocks <0#.GDAXI>, the lower
investors' appetite for risky assets such as stocks.
In Asia, U.S. stock futures slid nearly 3 percent <ESc1> at
one point, while safe-haven U.S. Treasuries soared, with 10-year
Treasuries climbing more than a full point earlier <US10YT=RR>.
Moves of such a degree in Asian hours are rare in those markets.
U.S. crude oil <CLc1> fell 1.9 percent to $99.30 a barrel.
BUNDS, DOLLAR BENEFIT
The bund future <FGBLc1> rose 67 ticks. Japan's benchmark
10-year yields rose by one basis point to 1.215 percent
<JP10YTN=JBTC>.
Japan's five-year credit default swaps, which gauge the cost
of insuring the country's debt against default, jumped 28 basis
points from the close to a record high of 122 basis points.
The dollar <.DXY> rose 0.5 percent against a basket of major
currencies, pulling away from last week's four-month low, while
the yen rose across the board.
The Australian dollar fell 1.2 percent to 81.37 yen
<AUDJPY=R> and the euro slipped 0.4 percent to 113.75 yen
<EURJPY=R>.
The Japanese currency was steady at 81.50 per dollar <JPY=>,
with Japanese repatriation flows balancing selling by foreign
investors who sold the stock market.
The Bank of Japan stepped in to keep the banking system
stable for a second day, offering $98 billion of cash if needed.
It lined up a record $183 billion in same-day funds on Monday
and doubled an asset-buying scheme to support prices.
The BOJ said on Monday it would double the size of its asset
purchase to 10 trillion yen ($122 billion).
(Additional reporting by Atul Prakash; Editing by Catherine
Evans)
