* MSCI world steadies after biggest 1-day loss in 14 mths
* Q2 ends with losses of more than 10 pct, worst since 2008
* Euro bounces after 2 days of steep drops; ECB funding eyed
By Mike Dolan
LONDON, June 30 (Reuters) - World stocks steadied on
Wednesday after their biggest one-day plunge in over a year but
fresh banking stress and fears of a double-dip global recession
preyed on investors on the final day of a torrid second quarter.
MSCI's world equity index <.MIWD00000PUS>, which has lost
more than 10 percent since April and is down more than 7 percent
over the first six months of 2010, held the line after losing
more than three percent on Tuesday.
The index has recorded its worst quarter since the final
three months of 2008 when the demise of Lehman Brothers sent
world markets and the economy in to a tailspin.
Traders awaited the outcome on Wednesday of the European
Central Bank's latest bank refinancing operations as 442 billion
euros of one-year emergency funding is due to be paid back to
the central bank on the first day of third quarter on Thursday.
The ECB holds a three-month tender that many in the market
expect will be tapped as banks scramble to pay back the one-year
funds. Expectations are that 210 billion euros will be allotted
at the offer. []
Analysts reckon there is probably enough additional, if
shorter-term, ECB financing tools to make up the drain caused by
the maturing one-year loans.
"The banks are in effect swapping a comfy sofa for a stool
-- but at least there are plenty of stools," said Societe
Generale rate strategist Suki Mann.
The looming publication of European bank stress tests next
month has added to the fresh nerves about the sector.
The FTSEurofirst 300 index of European stocks <> was
0.25 percent higher on Wednesday from a three-week closing low
in the prior session. European banking stocks <.SX7P> rebounded
0.6 percent.
Safe-haven German government bond futures for September
delivery <FGBLc1> were 0.11 percent higher at 129.57.
"A confluence of events may well cause market anxiety to
culminate today, potentially causing risk aversion to mark at
least a local peak," said Commerzbank rate strategist Christoph
Rieger, adding that Bund option expiries, month-end portfolio
adjustments and U.S. employment data were also likely to weigh.
U.S. June private-sector employment data from ADP is due out
later in the session and the benchmark non-farm payrolls report
is due on Friday. U.S. stock futures <SPc1> pointed to a
slightly higher open on Wall Street later.
CONFLUENCE OF FEARS
Alongside European banking and sovereign debt jitters and the
calendar stresses of the half-year mark, investors are
increasingly fearful for global economic growth after a series
of downbeat reports from the United States and China.
"Markets are very sensitive to any signs that growth is
failing. There have been question marks over the big components
of global growth such as U.S. consumer demand and Chinese demand
... (and) there isn't a lot of good news," said Bernard
McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Risk reduction was fuelled by a report that showed a slump
in U.S. consumer confidence. []
Chinese stocks <> fell 1.2 percent, extending a 4
percent slide on Tuesday to a new 14-month low, as tight market
liquidity forced investors to sell shares to make room for a
major initial public offering by Agricultural Bank of China.
Emerging stocks <.MSCIEF> dropped another 0.5 percent on
Wednesday after almost three percent losses on Tuesday.
Earlier, the MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> dropped another 0.5 percent. Japan's Nikkei
average <> fell 2 percent to a seven-month low after
breaking below a support level.
"Equity markets in general have been left looking somewhat
drained and the question is whether, given these fundamentals
plus the backdrop of reigning in stimulus measures and in the
longer term rising interest rates, another rally is actually
sustainable," said Ben Potter, analyst at IG Markets.
The euro rebounded after two days of steep losses. By 0900
GMT, the euro edged up 0.3 percent to $1.2221 <EUR=>, still not
far from a two-week low near $1.2150 <EUR=> struck on Tuesday.
(Additional reporting by Atul Prakash, Kirsten Donovan and
Kevin Yao; Editing by Mike Peacock)
