GLOBAL MARKETS-Bank troubles hit world stocks, dollar up

                                
   * MSCI world equity index under pressure on bank worries
                                
 * Dollar hits one-month high ahead of Fed meeting
                                
 * Gold soars to record as India central bank buys from IMF
                                
 (Updates with U.S. markets close, quotes on dollar)
                                
 By Jennifer Ablan
                                
 NEW YORK, Nov 3 (Reuters) - Investors scrambled for safety
on Tuesday, driving world stocks lower and propelling bids for
government bonds and the dollar on poor results from UBS
<UBSN.VX> and a shake-up of UK banks Lloyds <LLOY.L> and Royal
Bank of Scotland <RBS.L>.
                                
 UBS shares were down nearly 6 percent following news the
Swiss bank suffered a larger-than-expected asset outflow in the
third quarter For more, see: [nL2713325]. Lloyds shares were
under pressure after it launched a record 13.5 billion pound
($22 billion) rights issue. Along with RBS, it agreed to sell
off businesses as part of a deal to limit reliance on
government support. [nL3540088]
                                
 Adding to the sector's problems, the European Commission
said results of stress tests on euro zone banks showed losses
could amount to 400 billion euros ($590.9 billion) in
2009-2010. [nL3566693]
                                
 "Equity market setbacks have a propensity to re-ignite risk
aversion investment activity," said Tom Sowanick, co-president
and chief investment officer of Omnivest Group.
                                
 World stocks as measured by MSCI <.MIWD00000PUS> fell 0.44
percent. The index rallied by 75 percent between early March
and late October on growing optimism over the global economy,
but fell 4 percent last week.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
was down 1.16 percent, losing ground for the sixth time in nine
sessions. Riskier emerging market shares <.MSCIEF> fell 0.83
percent.
                                
 Parts of the U.S. equities market were down.
                                
 The Dow Jones industrial average <.DJI> was off 17.53
points, or 0.18 percent, at 9,771.91, but the Standard & Poor's
500 Index <.SPX> was up 2.53 points, or 0.24 percent, at
1,045.41. The Nasdaq Composite Index <.IXIC> was up 8.12
points, or 0.40 percent, at 2,057.32.
                                
 Gold, which typically benefits during periods of
uncertainty for economic growth and financial markets, jumped
to a record, but not on risk-aversion trades.
                                
 Spot gold prices <XAU=> hit a record $1088 following news
that India's central bank bought 200 metric tons of the metal
from the International Monetary Fund, heightening speculation
there may be more official purchases.
                                
 At the end of Tuesday trading, gold gained $26.00, or 2.46
percent, to close at $1084.80.
                                
 INVESTORS HIDE IN DOLLARS
                                
 Not coincidentally, the safe-haven dollar was up against a
basket of major trading-partner currencies, helped by lower
equity markets. The U.S. Dollar Index <.DXY> gained as much as
0.20 percent to 76.444 before edging back to 76.331, up 0.05
percent, from a previous session close of 76.290.
                                
 In early trade on Tuesday, the Dollar Index climbed as high
as 76.817, its highest since early October.
                                
   The euro <EUR=> was down 0.36 percent at $1.4715 from a
previous session close of $1.4768. Against the Japanese yen,
the dollar <JPY=> was up 0.01 percent at 90.34 from a previous
session close of 90.330.
                                
 The Federal Reserve starts a two-day meeting on interest
rates on Tuesday, the European Central Bank and Bank of England
make rate decisions on Thursday, U.S. employment data is due on
Friday and G20 finance ministers meet in St Andrews, Scotland,
this weekend.
                                
 "A lot of the dollar rally in the last 8-9 days is based on
a tough Fed. They think the Fed is going to change their
language or do something but they can't do anything until
employment turns around," said Lance Lewis of Lewis Capital
Partners.
                                
 The Fed is not expected to depart from a policy of
maintaining low rates for an extended period but it could
discuss how to prepare markets for an eventual policy shift.
The ECB and BoE are expected to keep rates on hold, but the UK
central bank may decide to pump yet more money into the
economy.
                                
  The Australian dollar <AUD=> fell more than 1 percent
after the country's central bank raised rates on Tuesday for a
second consecutive month, hiking to 3.5 percent.
                                
 In energy and commodities markets, U.S. light sweet crude
oil <CLc1> rose $1.29, or 1.65 percent, to $79.42 per barrel.
The Reuters/Jefferies CRB Index <.CRB> was up 2.99 points, or
1.09 percent, at 276.49.
 (Additional reporting by Natsuko Waki in London and David
Gaffen in New York, Editing by Andrew Hay)