LONDON -- World stocks and emerging market assets weakened on Wednesday while safe-haven government bonds rose as UBS unveiled $4 billion in new write-downs, stirring fears the five-month-old credit crisis is deepening.

Investors were also reluctant to buy risky assets ahead of the US interest rate decision due later on Wednesday, when the Federal Reserve is expected to follow up on its emergency rate cut last week with another hefty easing.

UBS is among the hardest-hit of the banks around the world that have collectively suffered more than $100 billion in losses from the crisis originating from defaults in US subprime mortgages.

"2007 (was) a horrible year for the banks and the sector is not out of the woods yet," said Franz Wenzel, strategist at AXA Investment Managers in Paris.

"Most of the banks will try to put all the write-downs in their 2007 results as they want to clean the balance sheet going forward."

The FTSEurofirst 300 index was down 0.6 percent, while the MSCI main world equity index was down 0.5 percent, having hit a 15-month low last week.

Emerging sovereign spreads widened 4 basis points while emerging stocks fell 1.4 percent.

The March Bund future was up 0.2 percent.

The dollar was steady against a basket of currencies ahead of an expected Fed interest rate cut to 3.0 percent.

"A lot of risk has been taken off the table. The FX market is looking for the Fed to give it direction," said Peter Frank, senior currency strategist at Societe Generale.

"The last thing they want to do is stoke up risk aversion but they have to act aggressively. It's a fine line they have to walk here."

US light crude hit a two-week high above $92 a barrel, underpinned by expectations that US monetary policy easing will support the economy and demand for energy.

Gold slipped to $921.35 an ounce from Tuesday's record highs. Additional reporting by Blaise Robinson and Jamie McGeever; editing by Ruth Pitchford