By Natsuko Waki
LONDON (Reuters) - A wave of risk aversion hit financialmarkets on Friday, pushing world stocks to their lowest in morethan two years and knocking European currencies and oil asfears intensified about the global economic slowdown.
Safe-haven assets such as the yen and government bondsbenefited after Wall Street had its steepest decline in morethan two months as recent weak U.S. labour market data fannednervousness about a closely-watched monthly jobs report laterin the day.
Bank stocks took a hit after the European Central Banktightened rules on the assets banks can submit as collateral incentral bank lending operations following concern that itsrules have been open to misuse.
Risk aversion also hit emerging markets -- which havealready been under pressure in recent weeks on rising politicaland economic risk -- with benchmark emerging stocks hitting a17-month low.
"Global deleveraging remains the dominant theme in marketsas the economic and financial sector news continues todisappoint," noted Mitul Kotecha, head of FX strategy atCalyon.
"The path of destruction that this deleveraging is causingwas evident in the slide in U.S. equities and subsequentdecline in Asian equity markets."
The FTSEurofirst 300 index fell 1.2 percent, following evensteeper moves in Asian stocks.
The MSCI main world equity index dropped 1.2 percent,hitting its lowest since July 2006. The index has made sixsessions of consecutive losses and already lost 5.6 percentsince the start of the month.
U.S. stock futures were pointing to a lower day on WallStreet later. Data is expected to show that the U.S. economylost 75,000 non-farm jobs in August.
European banking shares fell 1.7 percent. The ECB is set toincrease the safety margin it takes in valuing assets, known asthe haircut, to 12 percent across the board for allasset-backed securities (ABS) which banks deposit with the ECBto receive short-term funding and access payment systems.
Analysts say the changes would make it less attractive forbanks to use ABS as collateral and would push up the overallcost of borrowing funds from the central bank.
WAVE OF RISK AVERSION
European currencies extended their recent decline onconcerns that economies outside the United States aredeteriorating, especially in Europe -- which is facingrecession.
Deepening such concerns, German industrial output fell by abigger-than-expected 1.8 percent in July, dipping for thefourth time in five months.
The euro had fallen to a 11-month low below $1.42 whilesterling hit a 12-year low on a trade-weighted basis.
The low-yielding yen surged to a 13-month high around150.60 per euro while it hit two-year lows against theAustralian and New Zealand dollars.
The dollar rose 0.15 percent against a basket of majorcurrencies. The index is up nearly 9 percent in the thirdquarter, on track for a biggest quarterly gain since the fourthquarter of 1992.
Emerging sovereign spreads widened 6 basis points to trade327 basis points above U.S. Treasuries. Emerging stocks lost2.4 percent.
The September Bund future rose 45 ticks, benefiting fromflows into safe-haven government bonds.
Concerns that the slowing economy would hit energy demandweighed on U.S. light crude, which fell 1.4 percent to $106.40a barrel. Gold ticked lower to $793.70 an ounce.
(Editing by Ron Askew)
