* MSCI world equity index inches up
* European stocks edge higher; Korea tensions eyed
* Euro falls amid debt concerns; government bonds firmer
By Natsuko Waki
LONDON, Dec 20 (Reuters) - World stocks edged higher towards
a recent two-year high on Monday while the euro hit a two-week
low as concerns over the euro zone debt crisis stayed in focus
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 safe-haven 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."
European Central Bank head Jean-Claude Trichet warned on
Monday Ireland needed to follow its bailout plan to the letter,
while the ECB voiced "serious concerns" a new law drafted by
Dublin could force the central bank to take losses on the
collateral it accepts in exchange for loans to commercial banks.
The MSCI world equity index <.MIWD00000PUS> was up around
0.2 percent while the Thomson Reuters global stock index
<.TRXFLDGLPU> was steady on the day.
The FTSEurofirst 300 index <> rose 0.9 percent,
boosted by utility shares, while Asian shares <.MIAPJ0000PUS>
fell a third of a percent. U.S. stock futures were up around 0.2
percent, pointing to a firmer open on Wall Street later.
"Macroeconomic figures were lately on the upside... If
momentum in economic data continues to be good, then the market
can stay around the current levels," said Koen De Leus,
strategist at KBC Securities, in Brussels.
Emerging stocks <.MSCIEF> lost 0.3 percent.
U.S. crude oil <CLc1> rose 0.2 percent to $88.19 a barrel as
freezing temperatures in Europe and the U.S. Northeast looked
set to boost demand for heating fuel.
Bund futures <FGBLc1> rose 40 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 <KRW=> briefly hit a four-week low
against the dollar after South Korea's drills.
(Additional reporting by Naomi Tajitsu and Atul Prakash;
Editing by John Stonestreet)
