* MSCI world equity index down 1.7 percent at 203.66
* GM and Chrysler concerns and banking woes hit shares
* Government bonds, yen rally; oil falls
By Natsuko Waki
LONDON, March 30 (Reuters) - World stocks hit a one-week low
and government bonds rose on Monday after General Motors and
Chrysler edged closer to bankruptcy as their turnaround plans
were rejected and tensions rose in Europe's banking sector.
The Obama administration's autos task force rejected
multi-billion dollar pleas from the two U.S. automakers for more
funds and warned both could be put through bankruptcy to slash
debts. The auto industry woes are putting more pressure on Group
of 20 leaders as they meet in London this week to discuss
measures to tackle the crisis.
In the latest sign of global stress, Spain was forced to
bail out regional savings bank Caja Castilla la Mancha, its
first banking rescue since the financial crisis began.
"Today's main negative trigger is the GM-Chrysler news. Add
to this the Spain bailout and it's clear that the markets are
falling," said Giuseppe-Guido Amato, strategist at Lang &
Schwarz in Germany.
MSCI world equity index <.MIWD00000PUS> fell 1.8 percent,
having risen 4.5 percent last week. The FTSEurofirst 300 index
<> fell 2.3 percent.
Banking sector concerns intensified also after Germany and
Britain acted to shore up lenders.
Germany's government has agreed to take an 8.7 percent stake
in stricken Hypo Real Estate <HRXG.DE> as a prelude to acquiring
full control. Britain helped orchestrate the takeover of
building society Dunfermline by Nationwide.
U.S. stock futures were down around 2.3 percent, pointing to
a weaker start on Wall Street. GM shares fell 18 percent in
pre-market trading <GM.N>.
"The market is at a period of maximum vulnerability, its easy
to recover from lows but its hard to see traction for recovery
with the macro view not being prepossessing and the earnings
outlook remains dire," said Jeremy Batstone-Carr, analyst at
Charles Stanley.
Emerging stocks <.MSCIEF> lost 4 percent
U.S. crude oil <CLc1> fell 3.2 percent to $50.70 a barrel.
The June bund futures contract <FGBLc1> rose 34 ticks.
The low-yielding yen, which rises in times of risk aversion,
gained 1.4 percent to 96.67 per dollar <JPY=>. The euro was down
a third of a percent at $1.3181 <EUR=> while the dollar <.DXY>
rose 0.6 percent against a basket of major currencies.
G20 FOCUS
Investors are looking to this week's G20 summit to see if
the leaders can further bolster confidence in equity markets,
which are on track for the biggest monthly gain in nearly 9
years despite Monday's losses.
The Financial Times newspaper, quoting a draft communique,
said the G20 leaders hope to restore global growth by the end of
2010 but much depends on when the United States pulls out of its
economic tailspin.
"It is `make or break time' and politicians and central
bankers have to decide to agree or disagree, to find a global
policy response or to continue uncoordinated isolated national
approaches eventually leading to financial and market
protectionism making this crisis even worse," BNP Paribas said
in a note to clients.
(Additional reporting by Christoph Steitz and Simon Falush)
