* MSCI world equity index hits three-month low
* Greece debt woes, China inflation jitters hit risk demand
* Dollar index climbs to six-month high
By Naomi Tajitsu
LONDON, Feb 1 (Reuters) - World shares sank to a three-month
low on Monday as concerns about Greece's debts and a reminder of
the challenges China faces to curb inflation stung risk demand,
helping push the dollar to a six-month high versus a currency
basket.
The MSCI world equity index <.MIWD00000PUS> fell to its
weakest level since early November, as investors cut exposure to
risky trades while Athens scrambles to convince its European
colleagues it will do what it takes to repair its finances.
Speculation that China may have to tighten monetary policy
picked up after business polls on Monday showed strong growth an
higher inflation. []
This put selling pressure on high-risk, commodity-linked
currencies, which are seen suffering on any tempering in Chinese
growth, and helped lift the dollar index <.DXY> as high as
79.534, its highest since late July.
European shares <> took a hit in early trade, sliding
0.5 percent on the day and edging close to a near two-month low
hit late last week, while risk aversion also kept oil prices
<CLc1> near a 6-week low.
"The market is just worried about the things that have been
going on over the past few weeks," said Bernard McAlinden,
market strategist at NCB Stockbrokers in Dublin.
"There is apprehension about the possibility of tightening
(in China) and problems of the peripheral economies in the euro
zone."
By 0913 GMT, the MSCI index was at 285.60, extending losses
after it fell roughly 4.5 percent in January, its worst monthly
performance since February last year.
Higher risk aversion increased the dollar's safe-haven
appeal, lifting the U.S. currency's trade-weighted index and
keeping it near a seven-month high against the euro of $1.3852
<EUR=> hit early on Monday.
The high-yielding Australian and New Zealand dollars hit
their weakest in more than a month against their U.S.
counterpart.
GREEK/BUND SPREADS
Risk appetite continues to suffer as markets wait to see if
Greece will come up with a decisive plan to shore up its
finances and cut its debts. The European Union is seen telling
Greece to act by mid-May to improve its books. []
Concerns about Athens's fiscal situation has triggered heavy
selling in Greek bonds, whose yield spreads against German debt
blew out to their widest levels on record last week.
The 10-year Greek government bond yielded some 358 basis
points more than benchmark German Bunds, compared with around
360 bps late on Friday, and was well off the euro lifetime high
of around 405 bps set last week.
Concerns about sovereign debt in Greece and other euro zone
nations including Spain and Portugal have triggered selling in
their government bonds, which has boosted demand for German
bonds, which are considered to be safer.
Ten-year Bund futures <FGBLc1> edged up 14 ticks to 123.52,
staying close to 123.70 hit late last week, its highest since
early December.
(Additional reporting by Joanne Frearson in London, editing by
Mike Peacock)
