* Lehman Q2 loss estimate keeps stocks near 1-1/2 month low
* ECB rate hike speculation boosts euro, long-dated bonds
* Oil eases, but within $3 of last week's record
(Updates with Lehman, Wall Street outlook)
By Natsuko Waki
LONDON, June 9 (Reuters) - World stocks fell towards a 1-1/2
month low hit earlier on Monday as Lehman Brothers <LEH.N>'
estimate of a second-quarter loss renewed concerns about the
health of the bank sector.
The euro and euro zone government bonds extended last week's
dramatic repricing of interest rate expectations, with the
region's long-dated yields falling sharply on expectations the
European Central Bank's strong anti-inflation stance would tame
prices in the long term.
Lehman said it expected to report a second-quarter loss of
about $2.8 billion, reminding investors of troubles facing
investment banks hit by the 10-month-old credit crisis. The bank
also said it would raise fresh capital of $6 billion.
The news came as world stocks were already under pressure
from last week's surge in oil prices and weak U.S. jobs data
which fanned worries that the global the economy is facing a
damaging mix of rising prices and slowing growth.
"This just underlines the fact that we're still in a
situation generally where financial institutions still have more
work to do to instill confidence in the broader market and that
could take some time yet," said Derek Halpenny, currency
strategist at BTM UFJ.
The FTSEurofirst 300 index <> was down 0.3 percent on
the day, while MSCI main world equity index <.MIWD00000PUS>
dropped 0.4 percent.
Banks were the top losers in Europe <.SX7P>. UBS <UBSN.VX>
fell up to 9 percent after a Swiss newspaper reported the bank,
Europe's hardest-hit victim of the credit crisis, will make a
loss of up to 4 billion Swiss francs ($3.93 billion) in the
second quarter.
"The backdrop is still unfavourable," Chris Iggo, strategist
at Axa Investment Managers.
"Along with some of the macro things that are happening -
inflation, ECB raising interest rates -- you can't see equities
doing particularly well in that environment and I would expect
us to see further losses over the summer."
Emerging sovereign spreads <11EMJ> widened 1 basis point
while emerging stocks <.MSCIEF> were down more than 1 percent.
U.S. stock futures were pointing to a firmer open on Wall
Street <SPc1> after suffering a heavy sell-off on Friday.
FX/BONDS WHIPSAW
The dramatic moves in euro zone fixed income and currency
markets started last week when ECB President Jean-Claude Trichet
said the central bank could raise interest rates in July.
Just two days before Trichet's comments, Federal Reserve
chairman Ben Bernanke broke tradition by warning of the
inflationary impact from a weak dollar.
"While the commentary from central banks over the course of
the past week, with the strong emphasis on fighting inflation,
may look as if a co-ordinated approach is being taken, the
policies being implemented have contradictory consequences, with
potentially negative implications for asset markets and the
credibility of policymakers," BNP Paribas said in a note.
Two-year bond yields <EU2YT=RR> had risen as much as 3.4 bps
to 4.686 percent at one point, while 10-year yields <EU10YT=RR>
rose 12.2 bps at 4.301 percent.
The yield curve inverted further to as much as 42 bps, with
short-dated yields above those on longer-term paper. That is the
deepest inversion since 1999 and continues the rapid flattening
seen last week.
The euro hit a six-week high of $1.5845 <EUR=> on
expectations of a yield-enhancing rate hike next month, before
erasing gains.
U.S. light crude <CLc1> fell 1.3 percent to $136.70 a barrel
after hitting record $139.12 on Friday. Gold <XAU=> hit a near
2-week high of $904.10 an ounce.
(Additional reporting by Veronica Brown and Michael Taylor;
Editing by Gerrard Raven)
