* MSCI world equity index down more than 1 pct
* Euro hits fresh 4-year low vs dollar
* Oil down 3 pct, government bonds, dollar rise
By Natsuko Waki
LONDON, June 1 (Reuters) - World stocks fell on Tuesday and
the euro hit a four-year low against the dollar as expectations
that slowing growth in China and the euro zone would hamper the
global economic recovery hit riskier assets.
European stocks dropped nearly 2 percent with BP <BP.L>
losing more than 15 percent after its attempt to plug the worst
oil spill in U.S. history in the Gulf of Mexico failed.
After May saw the most volatile month of trading since the
aftermath of Lehman Brothers' collapse in late 2008, investors
focused on concerns that growth would slow in a euro zone
struggling to rein in debt, in turn reducing demand for exports
from economies like China, reducing production there.
A survey showed manufacturing activity in the euro zone
expanded in May at a considerably more sluggish pace than in
April [], while separate data showed the pace of
China's factory output eased last month [].
U.S. stock futures pointed to a weaker open on Wall Street,
down around 1.4 percent <SPc1>. U.S. shares fell one percent on
Friday before a long weekend.
"With the weakness on Wall Street we saw on Friday, and the
uncertainty over the euro zone, the fragility of the market
certainly hasn't gone away ... we are back to risk aversion,"
said Richard Hunter, head of equities at Hargreaves Lansdown.
MSCI world equity index <.MIWD00000PUS> fell more than 1
percent on the day. The index has lost nearly 10 percent since
April, putting it on track for its biggest quarterly loss since
March 2009.
The FTSEurofirst 300 index <> fell 1.8 percent while
emerging stocks <.MSCIEF> lost 2.1 percent.
The cost of protecting Italian government debt against
default hit a record high of 250 basis points as concerns about
euro zone sovereign ratings grew after a downgrade of Spain's
credit rating last week.
The five-year BP credit default swap shot up by 71 basis
points to 173 bps, according to CDS monitor Markit.
EURO DOWN AGAIN
The euro fell 1.4 percent to $1.2112 <EUR=>, its lowest
since April 2006. The dollar <.DXY> rose to its highest in 15
months against a basket of major currencies.
The single currency has been under pressure as concerns grew
that the region's sovereign debt problems and slowing growth
will usher in a new round of writedowns for the banking sector.
The European Central Bank warned on Monday that euro zone
banks faced up to 195 billion euros ($239 billion) in a "second
wave" of potential loan losses over the next 18 months due to
the financial crisis, and said it had increased purchases of
euro zone government bonds. []
"The situation remains difficult for the euro," Commerzbank
said in a note to clients.
"Concerns about the consequences of the savings measures
that have been initiated in many countries demonstrate how bad
sentiment for the joint currency currently is."
Global growth concerns weighed on oil, with U.S. crude oil
<CLc1> losing 3 percent at one point to below $72 a barrel.
Falling risky assets boosted demand for government bonds,
pushing Bund futures <FGBLc1> up 47 ticks.
(Additional reporting by David Brett, editing by Mike Peacock)
