* Economy worries hit stocks and oil, lift yen
* Europe shares down 0.4 percent, Japan 2.4 percent
* Yen hits six week high, oil around $62 a barrel
* Wall Street set for small gains
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 8 (Reuters) - Economy jitters swept financial markets on Wednesday, weakening stocks, propelling the Japanese yen to a six-week high and dragging oil down to around $62 a barrel.
Wall Street, however, looked set for small gains after sharp losses the previous session.
Investors have begun worrying that global economic recovery will not be as quick or robust as many had hoped.
Comments by officials and politicians that a second package may be necessary to stimulate the U.S. economy, coupled with heavy U.S. job losses, have particularly hit investors' appetite for taking risks. [] [] "Talk of more stimulus spending is making investors nervous," said Kim Seong-joo, an analyst at Daewoo Securities in Seoul.
Markets were also awaiting the corporate earnings season, with aluminium giant Alcoa <AA.N> due to start it later on Wednesday. Consultants Absolute Strategy Research warned that overall earnings expectations were far ahead of company news []
Most investors are still banking on a global recovery over the next year, albeit an undynamic one.
Barclays Wealth said on Wednesday, for example, that it gave a 60 percent chance of a sluggish recovery, 20 percent for one with real momentum and a 20 percent chance of a slide into depression.
But the recent worries have prompted a pull back from the second quarter's sharp rally which has pushed many European and U.S. stock indexes into the red for the year-to-date.
MSCI's all-country world stock index <.MIWD00000PUS> was down 0.6 percent, heading for its fifth day of losses in a row. Japanese stocks closed down 2.4 percent <>.
European shares fell, following Tuesday's big losses on Wall Street. The FTSEurofirst 300 <> index of top European shares was down a third of a percent, off its lows but around levels last seen in April.
Oil firms were among the biggest losers, reflecting lower energy prices. Oil dropped at one point below $62 a barrel before recovering slightly. It was on course for its sixth consecutive daily fall and longest losing streak since mid-December.
ASCENDANT YEN
Doubts about the recovery have helped to pull currencies such as the Australian dollar, sterling and the euro well off peaks hit in June, and the dollar and the yen have risen in the past few weeks. The Japanese currency hit its highest levels in around seven weeks on Wednesday against the dollar and euro.
In times of uncertainty investors often move into the yen, which they consider a relatively safe place for their money.
"The sharp fall in the cross yen pairs is reflecting speculators closing long positions in risk assets," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "There is very little clarity on the global outlook, and there is uncertainty over the earnings season."
The euro was down half a percent at 131.43 yen <EURJPY=>, having hit its lowest since late May. The dollar hit a six-week low and was later down half a percent at 94.40 yen <JPY=>, according to Reuters data.
The dollar index, a gauge of its performance against six major currencies, was steady at 80.55 <.DXY>.
Euro zone government bonds yields were mixed. The interest rate-sensitive two-year Schatz yield <EU2YT=RR> was down 2.8 basis points at 1.196 percent. The 10-year Bund yield <EU10YT=RR> was flat at 3.305 percent. (Additional reporting by Tamawa Desai, editing by David Stamp) (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)
