(Adds headline tag)
* European equity markets open in red
* Beijing allows yuan to depreciate further
* Crude oil holds at 7-year lows on oversupply fears
* Emerging market stocks head for worst week since September
* Dollar on track for losing week as investors cut long
positions
By Dhara Ranasinghe
LONDON, Dec 11 (Reuters) - World stocks were on the brink of
a two-month low on Friday, as beaten-down oil prices and a slide
in China's yuan to 4-1/2 year lows left markets in a sombre
mood.
Volatile oil markets and worries about China, the world's
biggest commodities consumer, have pressured many markets ahead
of a widely anticipated interest rate hike by the U.S. Federal
Reserve next week.
MSCI's world stock index .MIWD00000PUS fell for a fifth
straight day as emerging markets tumbled again and European
shares .FTEU3 opened at a two-month low while the dollar
steadied.
"We are in risk-off mode," said Piotr Matys, emerging market
currency strategist at Rabobank in London.
"Another round of selling in commodities with oil prices at
new lows has sent global stocks lower and emerging market
commodity currencies are under pressure."
The Russian rouble RUB= tumbled 2 percent against the
dollar, with focus on a meeting of the Russian central bank
later on Friday.
Investors were also waiting for U.S. data which could cement
expectations that the Fed is gearing up to hike rates for the
first time in a decade next week.
U.S. retail sales, inflation and consumer sentiment data is
due between 1330 GMT and 1500 GMT. ECONALLUS
European shares .FTEU3 fell 0.7 percent, declining for a
fourth straight session, while MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS hit a
two-month low and posted a weekly loss of just over 3 percent.
YUAN LOWER AGAIN
China's yuan fell to its weakest in 4-1/2 years CNY=CFXS
at 6.4564 per dollar and posted its longest weekly losing streak
in a decade, dragging emerging Asian currencies lower, on
concerns about its slowing economy and expectations of a U.S.
rate hike next week.
Lower daily fixings for the currency by China's central bank
have also raised questions about how far Beijing intends to let
the currency depreciate.
"A U.S. rate hike would have a major impact on money flows
out of emerging markets including Hong Kong and China," said
Linus Yip, chief strategist at First Shanghai Securities.
"Also, if the yuan continues to depreciate, that's negative
to stocks as well, because it means investors are not confident
about China's economic restructuring."
Chinese shares closed lower .CSI300 ahead of a spate of
economic data scheduled to be released on Saturday. ECONCN
China's economy is on track to post about 7 percent annual
growth in 2015, an official at the country's top economic
planner said at a briefing on Friday. ID:nB9N13W00X
NEW LOW FOR OIL
Crude oil prices remained at levels not seen since early
2009 as output in the Middle East continued to rise despite an
already huge global glut.
Brent crude futures LCOc1 were down 0.5 percent at $39.52
a barrel, not far off almost seven-year lows hit earlier in the
session at $39.38 a barrel.
The sharp fall in oil prices since OPEC said last week it
would keep production high has fuelled expectations for lower
inflation, helping push down European government bond yields.
The dollar index .DXY , which tracks the U.S. currency
against a basket of six major rivals, edged down slightly. It
was on track for a weekly loss of about 0.5 percent after
investors trimmed dollar-long positions before the Fed meeting.
Fed fund futures place an 85 percent chance of the Fed
raising rates at its Dec. 15-16 meeting. A recent Reuters poll
also showed that all but one of 18 brokerages that deal directly
with the Fed expect a rate increase.
The euro EUR= edged up about 0.2 percent to $1.0965, after
comments from the European Central Bank's Ewald Nowotny this
week raised doubts about the extent to which U.S. and European
monetary policy will diverge. ID:nL8N13Y1SH
Emerging market stocks .MSCIEF were down for an eighth day
running and on course for their worst week since September.
South Africa's rand ZAR=D3 hit a new record low following
the abrupt dismissal this week of respected Finance Minister
Nhlanhla Nene. ID:nL8N13Z2YC