* MSCI world equity index down 0.2 percent at 288.84
* Oil below $69, weighs on energy shares
* Sterling hits 5-mth low vs euro after BoE King remarks
By Natsuko Waki
LONDON, Sept 24 (Reuters) - World stocks slipped from the
previous day's 11-month high on Thursday as falling oil prices
and caution ahead of the Group of 20 summit prompted investors
to cut back on risky assets.
Sterling fell sharply, hitting a five-month low against the
euro, after Bank of England governor Mervyn King said the weaker
pound is helping a necessary rebalancing of the UK economy
towards exports.
The Federal Reserve left interest rates on Wednesday as
expected and promised to hold interest rates very low for a long
time after leaving them close to zero percent as expected, which
supported government bonds across the board in Europe.
However, concerns that the Fed may be closer to pulling back
on their super loose monetary policy weighed on Wall Street.
The timing for exit strategy -- or plans to unwind emergency
economic support -- is a key issue for investors as the two-day
G20 summit in Pittsburgh starts on Thursday. G20 leaders are
seeking ways to nurture the recovery from the recession and
build safeguards against future catastrophes.[]
Crude oil prices <CLc1> fell below $69 a barrel, adding to a
nearly four percent drop on Wednesday, after data showing an
unexpectedly high build up in U.S. oil and products stockpiles
raised concerns oil prices may have risen too fast.
Thursday's decline in world stocks follows a near 27 percent
rise since January in the benchmark MSCI world equity index
<.MIWD00000PUS>, recouping more than half of last year's losses.
"Lately people have been buying (equities) for the wrong
reasons, and at the same time, a large number of people have
been expecting a pull-back... I think a pull-back of 5-6 percent
would be healthy," said Michael O'Sullivan, head of UK research
at Credit Suisse Private Banking.
The MSCI world index fell 0.2 percent while the FTSEurofirst
300 index <> fell 0.8 percent.
U.S. stock futures <SPc1> were steady, pointing to a steady
open on Wall Street. Emerging stocks <.MSCIEF> fell 0.6 percent.
KING HITS STERLING
The UK currency fell as low as 91.36 pence per euro
<EURGBP=>, its weakest since April, and was down 1 percent at
$1.6178 <GBP=>.
"Clearly (BoE's) King has no objections to further sterling
depreciation despite seeing a stubborn CPI. Today he admitted it
will be necessary with a weak pound in order to rebalance the UK
economy and this increasingly looks like a clear BoE target,"
SEB said in a note to clients.
SEB said it closed its long sterling trade with a loss of
2.8 percent.
The Fed's promise to keep interest rates low weighed on the
dollar, with the U.S. currency falling 0.9 percent to 90.66 yen
<JPY=>.
The euro rose 0.4 percent to $1.4774 <EUR=> with the
closely-watched Ifo survey showed German business sentiment
hitting its highest level in a year. However, the data fell
short of expectations for a bigger rise.
In the bond markets, the euro zone's benchmark September
bund future <FGBLc1> rose 27 ticks.
(Additional reporting by Simon Falush; Editing by Ron Askew)
