* MSCI world equity index down 0.25 pct
* Euro hits 2-1/2 month low on banking concerns
* Oil down; bonds also weaker
By Natsuko Waki
LONDON, Dec 15 (Reuters) - The euro hit a 2-1/2 month low
against a broadly firmer dollar on Tuesday while world stocks
slipped as concerns grew about the European banking sector and
the fiscal health of Greece.
An Austrian newspaper reported the country's central bank
and its financial market regulator have put Oesterreichische
Volksbanken <OTVVp.VI>, the country's top cooperative bank, on a
watchlist and asked it to find a new strategy. []
A spokesman for Oesterreichische Volksbanken, Austria's top
cooperative bank, is at no risk of nationalisation and a media
report it was on a regulator watchlist is inaccurate.
Nonetheless, the newspaper report, which did not cite
sources, fuelled concerns that European banks are in a fragile
state even after Monday's surprise announcement that Abu Dhabi
would provide Dubai $10 billion in bailout money eased concerns
about European banks which are heavily exposed to Dubai Inc.
Concerns about the fiscal health of Greece weighed on local
banks <.FTATBNK> and pushed the Greek bond yield higher relative
to the safer German counterpart after Prime Minister George
Papandreou's spending cut plans announced late on Monday failed
to convince investors.
"Persistent concerns about sovereign risk in Europe such as
those in Greece and softer stock markets are lending support to
the dollar," said Tomohiro Nishida, treasury department manager
at Chuo Mitsui Trust and Banking company.
MSCI world equity index <.MIWD00000PUS> fell 0.3 percent
while the FTSEurofirst 300 index <> edged down.
The dollar <.DXY> rose half a percent against a basket of
major currencies to its highest in six weeks.
The euro fell as low as $1.4553 <EUR=>, down two thirds of a
percent. The 10-year Greek/German government bond yield spread
widened to 257 basis points from 231 on Monday as investors
demanded higher premium to hold Greek debt.
"The rising inner European Monetary Union yield differential
is not only a sign of rising credit risk in EMU's peripheral, it
also illustrates that the currency project has been built on a
weak foundation," BNP Paribas said in a note to clients.
The bank argued that without fiscal transfers from the EMU's
core to the periphery, Greece, Spain, Portugal and Ireland would
have to go through massive deflationary shocks which would
affect via their exports channels as well as core Europe.
"Europe will develop towards a lower growth and inflation
regime, preventing the ECB from hiking rates for a long period,
which will work against the euro," Paribas said.
Emerging stocks <.MSCIEF> fell 0.4 percent.
Dubai stocks <> rose as much as 3.4 percent at one
point after Abu Dhabi's help averted a default on $4.1 billion
bond issued by property firm Nakheel, which said on Tuesday it
had sent the funds for the bond to the principal paying agent.
U.S. crude oil <CLc1> fell a quarter percent to $69.34.
Bund futures <FGBLc1> were steady on the day.
(Editing by Mike Peacock)
