* European stocks bounces after latest rout in Asia
* Asia stocks hit lowest since 2011, China stocks down 5 pct
* China baffles by guiding yuan higher, shares fall 3 pct
* Wild swings in thin markets see South African rand tumble
* Oil still on the slide, bonds and yen get safe-haven
support
By Marc Jones
LONDON, Jan 11 (Reuters) - World stocks fell to near 2-1/2
year lows on Monday as a fresh pounding for Chinese markets left
Asia at a four-year trough and sent oil and commodity markets
sprawling again.
Europe's main bourses saw a more steady start .FTEU3 but
investors were still shaky after a torrid session in Asia as
doubts continued to mount about Beijing's ability to manage the
world's second-biggest economy.
The absence of Tokyo for a holiday only made liquidity even
harder to come by, heightening volatility. Currency markets saw
some wild swings with the South African rand ZAR=D3 collapsing
to record lows at one point before bouncing.
Commodities were again on the ropes as Brent crude oil
LCOc1 shed 90 cents, or 2.6 percent, to $32.67 a barrel, while
U.S. crude CLc1 was 74 cents lighter at $32.41 as both hovered
near last week's 12-year lows. O/R
"The Chinese situation sets the agenda right now in
combination with oil prices," said Hans Peterson global, head of
asset allocation at SEB investment management.
"Before we see some meaningful transparency from China in
its actions and some stability in the commodity markets, we are
not going to get a stabilisation," he added, saying his firm had
become more cautious and been buying up bonds recently.
Europe was trying its best to shake of the jitters. After an
early wobble, the DAX .GDAXI in Germany and France's CAC
.FCHI climbed more than 1 percent and London's FTSE 100
.FTSE and Wall Street futures ESc1 both clawed back into
positive territory.
Asian trading had been brutal however.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slid 1.8 percent to its lowest since late 2011.
China's main indexes .CSI300 .SSEC slumped more than 5
percent, Australia .AXJO 1.2 percent and the Philippines
.PSI dropped 4.3 percent.
Beijing was again the epicentre of unease as the People's
Bank confounded analysts by guiding the yuan's midpoint rate
sharply stronger, a move that might calm concerns about a
competitive devaluation but only added to market confusion as to
Beijing's ultimate intent on its currency policy.
The move was an apparent reversal of the midpoint's recent
weakening trend which included the biggest one-day drop in the
guidance rate in five months on Jan. 7.
"Authorities are reluctant to let market forces rule, which
along with their indecisiveness and lack of transparency is
exacerbating uncertainty," said Tapas Strickland, an economist
at National Australia Bank.
"Understandably, amidst this global markets are selling
Chinese policymaker's ability to control their economy."
RAND SACKED
The uncertainty about the yuan only heightened tensions
ahead of China trade data on Wednesday where declines are
expected in exports and imports, underlining just how anaemic
world trade flows are right now.
Both the Dow .DJI and the S&P 500 .SPX had their worst
five-day starts in history last week, and the corporate news
flow is unlikely to get any cheerier with the coming results
season expected to be a tough one.
S&P 500 earnings are forecast to have dropped 4.2 percent in
the fourth quarter, a second straight quarterly decline led by
the hard-hit energy and materials sectors.
The pain in stocks and worries over China even outweighed
the positive impact of December's upbeat U.S. payrolls report
and burnished the appeal of higher-rated government bonds.
Yields on 3-, 7-, and 10-year U.S. Treasuries all had their
biggest weekly declines since early October last year, while
five-year yields dropped by the most since Sept. 2013.
The gains continued on Monday with U.S. 10-year Treasury
futures TYc1 up 3 ticks, while Fed fund futures 0#FF: were
pricing in a slightly shallower upward path for rates.
In currency markets, the main early news was the yen which
is often favoured in times of stress as Japan remains the
world's largest creditor nation.
The dollar initially fell half a yen to a near five-five
month low of 116.70 yen JPY= , before steadying around 117.65.
Dealers said Japanese investors seemed to be bailing out of
long positions in the South African rand by selling rand for
dollars and then those dollars for yen.
That saw the dollar surge as much as 10.3 percent at one
stage to 17.9950 rand ZAR=D3 , before tracking back to 16.5945.
That was still up from 16.3150 late on Friday.
Among the other key emerging market currencies, the Russian
rouble opened almost 2 percent weaker, continuing to fall along
with oil prices, while for the major, the euro started firmer
but soon softened to $1.0877 EUR= as the dollar index nudged
up to 98.656 .DXY . FRX/