* MSCI world equity index down 0.5 pct at 179.68
* GM warnings haunt markets; BoE, ECB moves weigh on FX
* Oil, govt bonds fall; gold shines
By Natsuko Waki
LONDON, March 5 (Reuters) - World stocks and oil fell on
Thursday after General Motors <GM.N> warned of possible
bankruptcy, while European currencies and yields stayed weak
after the euro zone and UK central banks cut interest rates.
U.S. automaker GM said it had substantial doubts about its
ability to continue as a going concern if it fails to stem its
losses and generate cash, and it may be forced to file for
bankruptcy. []
The euro and sterling were down about 0.7 percent against
the dollar after the European Central Bank and Bank of England
cut interest rates to all-time lows.
The BoE, after cutting the cost of borrowing to 0.5 percent,
said it would buy assets worth 75 billion pounds in order to
expand money supply. Euro zone rates now stand at 1.5 percent.
"The Bank of England has been cutting rates aggressively now
for several months, but it hasn't sparked life into the economy
so it's high time for new medicine, namely quantitative easing,"
said Manoj Ladwa, senior trader at ETX Capital.
"But it will only work if banks loosen their lending
criteria and a measure of business confidence returns. The
policy also needs to be monitored closely as increased money
supply coupled with falling production could lead to demand
outstripping supply and hyperinflation."
The euro fell to at $1.2562 <EUR=> while sterling was down
at $1.4092 <GBP=>. The dollar rose 0.6 percent <.DXY> against a
basket of major currencies.
GM WARNING
The MSCI world equity index <.MIWD00000PUS> fell half a
percent, approaching a six-year low hit on Wednesday.
The FTSEurofirst 300 index <> fell 2.2 percent while
U.S. stock futures were down about 1.5 percent <SPc1>.
GM said if it was unable to successfully reorganise and if
debtor-in-possession financing was unavailable, it would be
forced to liquidate under Chapter 7 of the U.S. bankruptcy code.
"When people hear the word bankruptcy it immediately brings
up negative connotations," said Andre Bakhos, president of
Princeton Financial Group in New Brunswick, New Jersey.
"It appears that the battle is being lost. It doesn't add
confidence."
Asian stocks <.MIAPJ0000PUS> lost 0.3 percent. Chinese
Premier Wen Jiabao disappointed investors as he did not announce
an increase in the country's two-year economic stimulus plan,
unveiled in November.
Wen did say China would ramp up deficit spending this year
to hits is 8-percent growth target.
U.S. crude oil <CLc1> fell 3.1 percent to $43.95 a barrel
after a nine-percent jump on Wednesday.
The March Bund future <FGBLc1> rose 95 ticks. Two-year euro
zone bond yield <EU2YT=RR> hit a record low of 1.148 percent.
The June UK gilt future leapt three full points after the
BoE said it would buy assets worth 75 billion sterling, focusing
on medium- to long-term gilts, in a drive to help the economy by
expanding money supply.
Gold, a safe-haven asset which investors prefer in times of
financial stress, rose to $913.55 an ounce <XAU=>.
(Editing by Mike Peacock)
