* MSCI world equity index down 1.8 percent at 217.29
* Oil falls 6 pct, yen hits 13-year high vs dollar
* Sterling hits record lows, US 10-yr Treasury yields fall
By Natsuko Waki
LONDON, Dec 12 (Reuters) - World stocks tumbled, Wall Street
was set to fall sharply hard and the yen hit a 13-year high
against the dollar on Friday after a $14 billion rescue plan for
top U.S. automakers collapsed.
Oil fell 6 percent.
Investors fled risky currencies, pushing sterling to record
lows against the euro and on a trade-weighted basis, while their
rush to safer government bonds drove the yield on the U.S.
10-year Treasury yield to its lowest in more than five decades.
The U.S. Senate failed to reach a last-ditch compromise to
bail out automakers on Thursday, effectively killing any chance
of congressional action this year which many say is necessary to
prevent a further lurch down for the already-shrinking economy.
"The key theme has been the rejection of the auto bailout
deal. This has clearly hit risk sentiment hard and helped to
fuel yen gains," BTM-UFJ currency economist Lee Hardman said.
MSCI world equity index <.MIWD00000PUS> fell 1.8 percent,
having hit a one-month high on Thursday. The FTSEurofirst 300
index of leading European shares <> lost 4.5 percent.
Asian shares <.MIAP0000PUS> were down 5.6 percent.
News that Bank of America <BAC.N> would cut up to 35,000
jobs and UK bank HBOS took a 8 billion pound hit on bad debts
and other charges this year, and a warning from JP Morgan
<JPM.N> on fourth-quarter performance, hit the banking sector,
the epicentre of the credit crisis which began in August 2007.
Bank of America, HBOS <HBOS.L> and JP Morgan <JPM.F> shares
fell 9 percent in Europe. JP Morgan's chief executive Jamie
Dimon said on Thursday the bank has had a "terrible" November
and December.
U.S. stock futures fell 2.3 percent <SPc1>. Emerging stocks
<.MSCIEF> fell 3.4 percent.
U.S. crude oil <CLc1> fell 6.4 percent to $44.93 a barrel as
concerns grew over energy demand in the slowing global economy.
The benchmark 10-year U.S. Treasury yield fell as low as
2.48 percent <US10YT=RR> as capital chased safer assets.
The December Bund futures <FGBLc1> rose 63 ticks.
The low-yielding yen rose as high as around 88.40 per dollar
according to Reuters data <JPY=>, shooting above a level where
Group of Seven finance ministers warned about excessive yen
strength in October.
According to a Royal Bank of Canada model, the probability
of Japanese intervention in the currency market stands at 33
percent.
"We ... would not suggest being long dollar/yen on an
expectation of imminent intervention," the bank said.
"However, growing concern on intervention will in our view
constrain dollar/yen to a relatively narrow range in the early
months of 2009."
Sterling hit record lows against the euro and on a
trade-weighted basis. It fell to 89.41 pence per euro <EURGBP=>.
The dollar <.DXY> was steady against a basket of major
currencies.
(Additional reporting by Jessica Mortimer, editing by Mike
Peacock)
