* Global stocks fall to five-year low
* Europe down 4 percent, Japan 9.6 percent
* Dollar at two-year high against major currencies
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 24 (Reuters) - Global stocks tumbled to a new
five-year low on Friday and demand for the relative safety of
government bonds and low-yielding currencies soared as economic
decline and corporate damage continued to grip investors.
MSCI's all-country world index was down 2.8 percent after
earlier hitting a level not seen since August 2003. The dollar
hit a two-year high against major currencies.
European shares were down around 4 percent and Japan's
Nikkei average <> plunged 9.6 percent. Emerging markets
were hit hard again, with MSCI's index for the asset class
<.MSCIEF> down 4.9 percent.
The emerging market stock index has now lost close to 14
percent this week and has wiped out all its massive gains from
the last four years.
"Nobody is willing to take risks under the current
circumstances, and risk aversion will only accelerate," said
Mitsuru Sahara, senior manager of foreign exchange sales for
Bank of Tokyo-Mitsubishi UFJ in Tokyo.
The financial crisis has now spread far beyond the banking
sector, with electronics maker Sony Corp and U.S. online
retailer Amazon.com Inc cutting their forecasts in the face of
weakening consumer demand.
South Korea led the decline on Friday with shares falling 11
percent, leading to a brokerage industry group asking its
members to stop selling shares to save the country from more
losses.
In Europe, the FTSEurofirst 300 index <> was down 4.1
percent having earlier hit its lowest level since mid-2003.
Hammered banks led the decline, with HSBC <HSBA.L> down 8.3
percent, Santander <SAN.MC> off 6.5 percent and UBS <UBSN.VX>
shedding 2.7 percent. The European banks sector <.SX7P> dropped
5.4 percent.
"Just when we thought it was safe to get back in the water
the markets remind us how choppy they can be," said Felix Riley
at ChoiceOdds.
"For every silver lining there is a cloud right now and the
fear of more systemic failure in the global economic machine
haunts every person wishing to go long."
Earlier, Japan's Nikkei slid 9.6 percent or 811.90 points to
7,649.08, a 5-1/2 year closing low. The benchmark lost 12
percent in the week and has fallen 50 percent so far this year.
DOLLAR, YEN SOAR
The dollar hit two year highs versus a basket of currencies
<.DXY> and the euro <EUR=> and sterling hit a five-year low
<GBP=>, reflecting heavy dollar repatriation.
The euro was at $1.2644 <EUR=>, just above the low. Sterling
hit a 5-year trough at $1.5834 and was later at $1.5863.
"Its extreme risk aversion and deleveraging of risky assets
... and we are seeing safe-haven flows into dollar and yen,"
said Lee Hardman, currency economist at BTM-UFJ.
The dollar hit a 13 year low of 94.79 against the Japanese
yen <JPY=> and was later at 95.07 yen.
Euro zone government bonds were higher. Two-year bond yields
<EU2YT=RR> were 7 basis points lower at 2.694 percent and
10-year yields <EU10YT=RR> lost 6 basis points to 3.725 percent.
(Additional reporting by Rebekah Curtis, editing by Mike
Peacock)
