* World stocks <.MIWD00000PUS> down 0.3 pct
* Wall Street set for modest gains
* Risk aversion rises on China, Fed, bank regulation, Greece
* Emerging markets <.MSCIEF> down 0.5 pct, risk plays pared
* Greek debt spreads widen to new record, dollar <.DXY> flat
By Mike Dolan
LONDON, Jan 27 (Reuters) - Global stock markets fell again
on Wednesday, hitting their lowest in two months as investors
fretted about a monetary squeeze from central banks around the
world and also the impact of tightening U.S. banking regulation.
European markets <> were down 0.2 percent, well off
their lows as Wall Street looked set for a modestly positive
start.
Asia stocks <.MIAPJ0000PUS> had a 9th straight day of losses
on continued reverberations over China's credit tightening this
week.
Investors were also on edge as the U.S. Federal Reserve was
due to end its latest two-day policy meeting later in the day.
While the meeting is expected to yield little in terms of a
near-term policy shift, traders will scour its statement for
clues on when it may wind down its policy of quantitative easing
-- effectively money printing via purchases of bonds.
What is more, the meeting is taking place amid a fierce
Senate debate over whether Fed Chairman Ben Bernanke should be
appointed for a second term, another factor weighing on investor
confidence this week.
There were also concerns about the intensifying regulatory
backlash against U.S. and global banks, captured by U.S.
President Barack Obama's latest proposals to limit the size of
banks, their proprietary trading and their links to hedge funds.
"There are worries about the Fed phasing out quantitative
easing," said Bernard McAlinden, investment strategist at NCB
Stockbrokers. "There are also still worries about Obama's plans
for banks, and Chinese growth."
"We're well into a major correction now, and this is about
as big as most corrections get. The outlook is for some sideways
trading," he said.
ASIA, EMERGING MARKETS RATTLED
Risk aversion everywhere was heightened by regulatory
concerns, China tightening, the Fed meeting and sovereign debt
worries in Greece and elsewhere.
The premium investors demand to hold 10-year Greek
government bonds rather than benchmark German Bunds jumped to a
euro lifetime high after the Greek finance ministry said there
was no deal to sell bonds to China.
Ten-year Greek bonds yielded as much as 345.6 basis points
over German Bunds after the comments denying press reports
Greece planned to sell about 25 billion euros of its debt to
China. []
"They've denied the China sale story and that was the only
thing that was keeping the market in," said a trader in London.
The dollar <.DXY> was flat against a basket of currencies
after earlier rising.
"Concerns over China and Greece are still in the background.
The uncertainty all this suggests is likely to keep risk on the
back foot," said Gavin Friend, currency strategist at National
Australia Bank.
Euro zone government bonds yields <EU10YT=RR> were higher.
(Additional reporting by Brian Gorman, Kevin Yao and Tamawa
Desai; Editing by Toby Chopra)
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Hub click on http://blogs.reuters.com/hedgehub)
