* World stocks fall; US automakers seek more help
* Euro in technical bounce from lows, E.Europe worry remains
* European bond yields plumb record lows, spreads widen
* Gold hits 7-month high
By Veronica Brown
LONDON, Feb 18 (Reuters) - World share prices struggled to
make headway on Wednesday as worries over a deepening recession
undermined confidence, pulling investors toward less risky
assets including government debt and gold.
In currencies, the euro recovered slightly after hitting
2-1/2 month lows against the dollar in a technically-based
rebound, but banking sector and economic concerns capped its
progress.
On top of Tuesday's weak U.S. manufacturing and housing
reports, the fate of U.S. automakers kept investor nerves on
edge after General Motors Corp <GM.N> and Chrysler LLC requested
nearly $22 billion in additional U.S. government loans.
[]
The automakers request came as U.S. President Barack Obama
signed into law a $787 billion stimulus bill on Tuesday.
"For the time being we remain cautious," said Thierry
Lacraz, strategist at Pictet in Geneva.
"The problem is that we don't have any clear answers from
the Obama government regarding the banking rescue package
...until we have more visibility on the U.S. banks and more
positive wording from companies, it's difficult to see markets
climbing again."
Global share prices, as measured by MSCI's world equity
index, were down 0.4 percent on the day at 198.05 reflecting
hefty falls in Asia overnight.
European stocks were dogged by deflationary worries --
amplified by oil falling below $35 a barrel <CLc1>.
The FTSEurofirst 300 index of leading European shares was
flat as a result, at 765.39 <>.
In Asia, Japan's Nikkei average <> fell 1.5 percent to
its lowest close in nearly four months and the MSCI index of
Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> fell 0.4
percent, after touching its lowest since late January.
SAFETY BID
Even as the euro rebounded from its 2-1/2 month low of
$1.2558 <EUR=>, growing concern over the single currency area's
ability to weather the global crisis reverberated in government
debt markets after this week's warning from credit ratings
agency Moody's on the severity of recession in Eastern Europe.
The benchmark euro zone two-year government bond yield fell
to a record low of 1.150 percent <EU2YT=RR>, surpassing
Tuesday's trough of 1.154 percent.
Spreads between the yields of German government debt and
those of Austria and Spain expanded to their widest since the
introduction of the euro as demand for Bunds outstripped that of
intra-euro zone debt [].
"There is still a lot of concern about the financial
situation of some EMU states as well as concerns about the
exposure of some banks to central Europe, so this is a
persistent driving force over the last couple of sessions," said
Patrick Jacq, interest rate strategist at BNP Paribas in France.
"In addition, stock markets are still vulnerable and close
to critical support, so the market is driven by safe-haven flows
to the benefit of govvies and Bunds in particular."
The desire for a port in the storm sent gold to a
seven-month high price of $973.50 per troy ounce <XAU=>.
Holdings at the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, struck a record 1,008.80 tonnes
on Tuesday, up 2.3 percent from Friday. []
(Additional reporting by Sitaraman Shankar and Ian Chua in
London)
(Reporting by Veronica Brown; Editing by Jason Neely)
