* Markets focus on ECB, BoE interest rate decisions
* Global equities steady after hitting two-year low
* Dollar firms but sterling hits 12-year trade-weighted low
By Jeremy Gaunt, European Investment Correspondent
LONDON, Sept 4 (Reuters) - Global equities stabilised on
Thursday after hitting a two-year low while the dollar trimmed
recent gains ahead of European interest rate decisions and the
British pound touched a trade-weighted 12-year low.
MSCI's main world stock index <.MSCI00000PUS> was flat to
slightly weaker. It dropped to its lowest level since September
2006 late on Wednesday.
The European Central Bank and Bank of England were both
meeting to discuss monetary policy, although both were expected
to leave rates steady at 4.25 percent and 5.0 percent,
respectively.
Differing economic and rate prospects have been driving the
dollar higher in recent weeks as the U.S.-triggered economic
downturn spreads to the euro zone and Britain.
The dollar, however, slipped on Thursday against a basket of
major currencies <.DXY> and was weaker against both the euro and
pound.
The euro <EUR=> brought $1.4532, a gain of around 0.3
percent, and the pound <GBP=> fetched $1.7832, a gain of about
half a percent.
Britain's currency woes continued, however, as sterling hit
a 12-year low against a trade-weighted basket of currencies
<=GBP>.
"Sterling still has a downside, data has been poor, and
people are speculating that the BoE will cut rates this year,"
said Paul Robson, strategist at RBS.
"It's the same sterling weakness story from yesterday, the
day before, and for the whole year, as a matter of fact."
STOCK WOES
Downbeat sentiment continued to play on world equity
markets.
The FTSEurofirst 300 index <> of pan-European shares
was down 0.1 percent. Japan's Nikkei average <> earlier
fell 1 percent to a five-month low.
"There are many worrying factors in the market, such as the
global economic outlook and the credit crunch."" said Katsuhiko
Kodama, senior strategist at Toyo Securities.
Oil prices firmed slightly to around $109.50 a barrel as
traders weighed concerns over slowing demand from major consumer
countries against further hurricane threats to the U.S. oil
sector.
Prices have tumbled by more than $6 since Friday after
Hurricane Gustav, which swept through the major oil-producing
Gulf of Mexico and made landfall near New Orleans on Monday,
turned out to be less destructive than feared.
"There are still concerns over supply issues. A lot of the
Gulf of Mexico capacity was shut down and some refineries are
still closed. We don't know how long they'll remain offline,"
said Gerard Rigby, an analyst at Fuel First Consulting in
Sydney.
Euro zone government bond yields rose as investors braced
for the ECB rate decision.
Two-year Schatz yielded 4.186 percent <EU2YT=RR>, 6 basis
points more than in late Wednesday trade, while 10-year Bund
yields <EU10YT=RR> were also 6 basis points higher at 4.197
percent.
"The post-meeting press conference will be watched closely
for any signs of a shift in the ECB's hawkish rhetoric in
response to rapidly slowing economic activity across the euro
zone," said Elwin de Groot, economist at Rabobank.
(Additional reporting by Naomi Tajitsu and Emelia
Sithole-Matarise; Editing by Ruth Pitchford)
