* MSCI world equity index down 0.5 percent
* Deutsche, Santander fan banking sector concerns
* UK cuts rates to 1 percent, ECB on hold at 2 percent
By Natsuko Waki
LONDON, Feb 5 (Reuters) - World stocks slipped on Thursday and Wall Street looked set for a negative start after European finance giant Deutsche Bank announced big losses and gave a bleak outlook.
The Bank of England underlined the depth of the global economic downturn by taking another 50 basis points off interest rates to 1 percent to help tumbling UK growth. This kept interest rates at the lowest level since the BoE was created in 1694.
The European Central Bank kept rates steady at 2.00 percent as expected.
Deutsche shares lost more than 6 percent after the group posted a 5.7 billion euro ($7.43 billion) pre-tax loss for 2008 and predicted a bleak future for the global economy and the banking industry.
Spanish rival Santander fell 2.1 percent after its bad debts increased to over 2 percent of loans. Swiss Re wrote down 6 billion Swiss francs in toxic assets and posted a 2008 net loss of 1 billion, sending its shares down 24 percent.
"(Today's news from banks) shows that there are still problems with the banking sector. It takes something like this to spark that fear again. It's far from over," said Altaz Dagha, economist at Bank of Scotland Treasury.
MSCI world equity index fell 0.5 percent while the FTSEurofirst 300 index of leading European shares dropped 1.2 percent.
Emerging stocks slipped 0.1 percent.
EURO AND ECB
Sterling jumped after the Bank of England cut rates by 50 basis points, as widely expected. The pound was at 2-week highs at $1.4615.
The euro was relatively unchanged form Wednesday level after teh ECB decision at $1.2837.
The ECB was expected to leave rates on hold this time. But ECB President Jean-Claude Trichet has hinted the central bank will cut again in March and markets are looking for clues as to the size of the next move.
A Reuters poll on Thursday showed the euro little changed against the dollar this year, but at least one more interest rate cut and a fragmented European response to the financial crisis could yet see it tumble further.
Euro zone government bonds were steady. The 10-year yielded 3.366 percent and the two-year 1.486 percent. (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 Fund Blog click on http://blogs.reuters.com/hedgehub) (Additional reporting by Jessica Mortimer; editing by Toby Chopra)