* MSCI world equity index down 1.2 pct at 275.38
* Investors nervous ahead of bank repayments to ECB
* Euro at 8-1/2-year lows vs yen, record trough vs Swissie
By Natsuko Waki
LONDON, June 29 (Reuters) - World stocks hit a 2-1/2 week
low on Tuesday while oil and the euro tumbled as investors
fretted over the funding situation of banks about to repay 442
billion euros ($545.5 billion) to the European Central Bank.
Banks must repay on Thursday money borrowed a year ago at
rock bottom rates, leaving a potential liquidity shortfall in
the financial system of more than 100 billion euros.
[]
The ECB holds a three-month tender on Wednesday that many in
the market expect will be tapped as banks scramble to pay back
the one-year funds. Expectations are that 210 billion euros will
be allotted at the offer. []
The state of banks will become clearer when the details of
bank stress tests are published next month.
Sources told Reuters on Monday that more than 100 banks in
Europe will be examined in a second round of stress tests to
gauge how well they can handle shocks to the financial system.
[]
Investors worry that the fragile banking sector may weigh on
global growth, which is already showing pockets of weakness,
especially in the euro zone.
"There are still concerns about growth coming to a grinding
halt and that the sovereign debt problems are much higher than
we think," said David Buik, senior partner at BGC partners.
The MSCI world equity index <.MIWD00000PUS> fell 1.2 percent
while the FTSEurofirst 300 index <> lost 1.8 percent.
Emerging stocks <.MSCIEF> dropped by 1.8 percent.
U.S. stock futures were down more than 1 percent <SPc1>,
pointing to a weaker open on Wall Street later.
Chinese stocks <> fell 4 percent to a 14-month low as
investors started pulling funds from the market to prepare for a
major initial public offering by Agricultural Bank of China,
pointing to tight liquidity in China's markets.
RISK TAKEN OFF
The euro fell 0.7 percent to $1.2187 <EUR=> and hit record
lows of 1.3250 against the safe-haven Swiss franc <CHF=>.
The euro lost more than 1 percent to fresh 8-1/2-year lows
of 107.83 yen <EURJPY=>.
"Equity markets are weak, so there's been a reasonably large
reverse in risk-taking behaviour," said Daragh Maher, senior
currency strategist at Credit Agricole.
"It's been an amplified reaction, due to limited liquidity,
and it will be difficult to tell how far the selling will
extend."
The dollar <.DXY> rose 0.6 percent against a basket of major
currencies.
U.S. crude oil <CLc1> fell 2 percent after forecasts
indicated tropical storm Alex would skirt the main production
region in the U.S. Gulf of Mexico, limiting disruptions to a few
precautionary shutdowns.
(Additional reporting by Joanne Frearson; Editing by Hugh
Lawson)
