GLOBAL MARKETS-World stocks steady; euro hits 2-week low

                                
* MSCI world equity index steady on the day
                                
 * European stocks edge higher; Korea tensions eyed
                                
 * Euro falls amid debt concerns; government bonds firmer
                                
 
                                
 By Natsuko Waki
                                
 LONDON, Dec 20 (Reuters) - World stocks held steady below a
recent two-year high on Monday while the euro hit a two-week low
as concerns over the euro zone debt crisis persisted following
last week's Irish rating downgrade.
                                
 Tensions in Korea also made investors wary. Despite threats
of war by Pyongyang, South Korea launched live-fire drills on a
disputed island after an emergency U.N. Security Council meeting
failed to agree on how to defuse the crisis.
                                
 Last week's five-notch credit rating downgrades of Ireland
by moody's and the absence of immediate steps from European
leaders to contain the crisis weighed on the single currency
while supporting German government bonds.
                                
 "The ratings change at the end of last week is still keeping
the euro under selling pressure," said Carl Hammer, currency
strategist at SEB in Stockholm.
                                
 "There is an underlying uncertainty with regards to the euro
zone which is very much in focus."
The MSCI world equity index <.MIWD00000PUS> and the Thomson
Reuters global stock index <.TRXFLDGLPU> were steady on the day.
                                
 The FTSEurofirst 300 index <.FTEU3> rose half a percent,
boosted by energy shares, while Asian shares <.MIAPJ0000PUS>
fell a third of a percent.
                                
 Emerging stocks <.MSCIEF> lost a quarter percent.
                                
 U.S. crude oil <CLc1> rose 0.1 percent to $88.12 a barrel as
freezing temperatures in Europe and the U.S. Northeast looked
set to boost demand for heating fuel.
                                
 Bund futures <FGBLc1> rose 77 ticks, with the tensions in
Korea supporting flows to safe-haven assets.
                                
 The euro fell as low as $1.3125 <EUR=> before trimming
losses to $1.3160.
                                
 "The lack of any substantive plan to bulk up the (European
stabilisation fund) or provide an alternative crisis management
system has kept the market euro negative as the downgrades keep
rolling in from Moody's on Ireland, Spain etc," Lloyds TSB said
in a note to clients.
                                
 "While there may well be something more forthcoming over the
next few weeks, for the moment the market is likely to see this
as a green light to sell the euro, suggesting risks of a break
below $1.30 in euro/dollar this week. 
                                
 The dollar <.DXY> was steady against a basket of major
currencies.
                                
 The Korean won briefly hit a four-week low against the
dollar after South Korea's drills.
                                
 (Additional reporting by Naomi Tajitsu; Editing by John
Stonestreet)