* MSCI world equity index down 0.4 percent at 354.73
* Oil hits new record above $141 a barrel
* Inflation fears, profit jitters hit investor sentiment
By Natsuko Waki
LONDON, June 27 (Reuters) - World stocks fell to a
three-month low on Friday after a surge in oil prices above $141
a barrel and a deteriorating global inflation picture fanned
concerns over the outlook for corporate profits.
Fresh data showed surging energy and other raw material
costs are putting upward pressure on prices in countries from
Japan to France while speculation of an imminent interest rate
hike in China pushed local shares to a 16-month low.
The latest round in a global stock markets sell-off began
earlier this week when Goldman Sachs urged investors to sell
bank and automaker shares.
To make matters worse, oil resumed its rally to set a fresh
record peak, with a deteriorating inflation picture in developed
and emerging markets pressuring major central banks to raise
interest rates in the face of slowing global growth.
"Every negative market factor possibly thinkable is in the
picture, and with the U.S. sell-off thrown in on top of that,
panic-selling has been triggered," said Oh Hyun-seok, market
analyst at Samsung Securities in Seoul.
MSCI main world equity index <.MIWD00000PUS> fell 0.6
percent to its lowest since March, with the index on track for
the worst monthly performance in percentage terms since
September 2002, according to Reuters data.
The FTSEurofirst 300 index <> fell 0.7 percent.
Shanghai stock index <> fell more than 5 percent to the new
16-month closing low.
"Any remaining confidence is gone -- in the stock market at
least, the crisis is worse than in Vietnam. Nobody knows what
the government plans to do," said Qian Xiangjing, analyst at
CITIC-Kington Securities.
Tokyo shares <> fell more than 2 percent. On Wall
Street, the Dow index fell 3 percent to a 21-month low <>.
INFLATION WORSENING
Japan's annual consumer inflation accelerated to a new
decade-high of 1.5 percent in May, while a rise in French
producer prices last month was its biggest since the start of
the data in January 1999.
The inflation picture is worse in emerging markets, where
countries like Vietnam and India are already experiencing
double-digit inflation.
"The macroeconomic environment has turned far more
challenging for EM policymakers. Slowing growth and accelerating
inflation create a tough policy backdrop," Lehman Brothers said
in a note to clients.
"Central banks are raising rates and could easily err by
being too hawkish or too dovish. There is a rising risk of
policy mistakes. Political pressures to intervene in markets are
growing, potentially creating long-term distortions and
weakening fiscal frameworks."
The European Central Bank is expected to become the first G7
central bank to raise interest rates next week, pushing the cost
of borrowing to 4.25 percent.
The dollar was steady against a basket of major currencies
<DXY>, having hit a 3-week low on Thursday.
"We're going to continue to see the dollar come under
pressure. We're seeing signs of increased risk aversion and as
we head into the quarter end, we're seeing increasing strains in
the various funding markets," said David Pais, currency
strategist at Citigroup.
Emerging sovereign spreads <11EMJ> tightened 3 basis points
while emerging stocks <.MSCIEF> fell 1.4 percent.
The September Bund future <FGBLU8> rose 30 ticks, drawing in
safe-haven funds as stocks fell.
U.S. light crude <CLc1> rose 1 percent to $141.17 a barrel.
Gold <XAU=> rose to $913.85 an ounce.
(Additional reporting by Ian Chua)
