(Updates with Wall Street, Libor)
By Natsuko Waki
LONDON, April 8 (Reuters) - World stocks fell on Tuesday,
relinquishing this week's one-month peaks after negative U.S.
company earnings news, while sterling hit an 11-year low after a
weak UK housing survey fuelled concerns about the economy.
Aluminium producer Alcoa Inc <AA.N> said late on Monday its
first-quarter profit halved from a year ago due to energy costs
and the weak dollar, while U.S. computer processor maker
Advanced Micro Devices <AMD.N> said it would cut 10 percent of
its workforce after Q1 sales fell more than expected.
A survey by UK mortgage lender Halifax on Tuesday showed
British house prices fell 2.5 percent in March, much more than
expected and the biggest monthly drop since September 1992.
As a result of these factors, investors shifted their focus
back to economic fundamentals after pushing world stocks up
every day since the new quarter began on expectations that
governments might help banks clean up credit-related problems.
"It's still looking very jittery at the moment. We've had
the banking problems wane away a little bit but there's still
uncertainty surrounding the sector... now that the dust has
settled and the rally's over," said James Hughes, market analyst
at CMC Markets.
The FTSEurofirst 300 index <> was down 1.1 percent,
while MSCI main world equity index <.MIWD00000PUS> fell 0.6
percent.
The MSCI index hit its highest since late February on
Monday, extending last week's gains, after losing nearly 10
percent in the first quarter.
U.S. stock futures <SPc1> were down around 0.4 percent,
indicating a weaker open on Wall Street later.
Expectations that Group of Seven finance chiefs who meet in
Washington this weekend might unveil a drastic plan to fix banks
and markets had improved sentiment since last week.
Money market tensions eased further, especially in sterling
funds <LIBOR> after the Bank of England said it would provide
three-month funds next week and consider other options to ensure
adequate liquidity in financial markets.
FOCUS BACK ON FUNDAMENTALS
Sterling was the biggest loser among major currencies,
hitting its weakest since 1996 on a trade-weighted basis <=GBP>
and losing 1 percent to hit a 1-1/2 month low of $1.9683 <GBP=>.
The Halifax survey offered the latest evidence that the
credit crunch was feeding through to households and cemented
expectations the Bank of England would cut interest rates this
week.
Also souring the general mood, New Zealand business
confidence slumped to a 33-year low in the first quarter while
Australian business conditions deteriorated to levels last seen
in December 2002.
"Market focus may slowly shift from the financial crisis to
the fall-out effects on the world's real economies," said
Stephen Jen, head of FX strategy at Morgan Stanley, in a note.
"The global economy's real business cycle has just begun to
migrate south, starting with more concrete evidence of a U.S.
recession."
The dollar was steady against a basket of major currencies
<.DXY>. Emerging sovereign spreads <11EMJ> widened 4 basis
points while emerging stocks <.MSCIEF> were down 0.8 percent.
The June Bund future <FGBLM8> was up 12 ticks, suggesting
renewed interest in safe-haven government debt.
Oil prices had risen above $109 <CLc1> before coming off
after Iran said it had started to set up advanced centrifuges at
a uranium enrichment facility and on fears over diesel supply
disruptions following a European refinery fire.
(Additional reporting by Golnar Motevalli; editing by Stephen
Nisbet)
