* Shares fall with oil after Saudi output comments
* Safe-haven yen, government debt in demand
* Sterling hits seven-year low under $1.39
* Wall St set to open lower
By Nigel Stephenson
LONDON, Feb 24 (Reuters) - Shares fell sharply on Wednesday as oil prices dropped after Saudi Arabia effectively ruled out output cuts by major producers, lifting investor appetite for low-risk assets such as the Japanese yen and gold.
Wall Street looked set to open lower, with index futures ESc1 SPc1 1YMc1 down nearly 1 percent.
Top-rated government bonds were in demand as the prospect of persistently low oil prices, which have fallen some 70 percent since mid-2014, to below $33 per barrel on Wednesday, raised concerns about weak global economic growth.
"It has been a broad risk-off environment with falling oil prices being the main trigger," Credit Agricole (PA:CAGR) strategist Orlando Green said.
The yen JPY= , often sought by investors as a shelter when riskier assets are under pressure, hit an almost three-year high against the euro EURJPY= of 122.43 yen.
Sterling, however, plumbed a seven-year low around $1.3880 on concern Britons might vote to leave the European Union in a June referendum. It last traded at $1.3876 GBP , down 1 percent on the day, and at 78.91 pence per euro EURGBP= .
The pound was on track for its worst three-day performance since mid-2009. It has shed almost 3 percent against the dollar this week after several senior members of Prime Minister David Cameron's Conservative Party threw their support behind the campaign to leave the EU.
The euro EUR= fell 0.5 percent to $1.0968.
"The euro is getting dragged down by sterling. UK exit risk is not just a UK risk, it's a European risk as well. That's challenging its safe-haven status and enhancing that of the Swiss franc and the yen," said RBC Capital Markets' head of FX strategy, Adam Cole.
The pan-European FTSEurofirst 300 share index .FTEU3 fell 2.3 percent, led lower by commodity-related stocks .SXPP , which fell nearly 6 percent. Britain's FTSE 100 index .FTSE lost 1.5 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.5 percent, slipping further from Monday's six-week high.
Tokyo's Nikkei index closed down 0.9 percent on the lower oil prices and a stronger yen. Chinese shares bucked the trend, with the CSI 300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen closing up 0.7 percent, led by industrial .CSI300IN and infrastructure .CSI300II stocks.
Oil prices remained weak after Saudi Oil Minister Ali Al-Naimi told oil executives on Tuesday that markets should not view the agreement by four major oil producers to freeze output at January levels as a prelude to production cuts. crude LCOc1 , the global benchmark, slid 83 cents or 1.5 percent to $32.44 a barrel.
"Al-Naimi's remarks punctured an oil-price rally that has lacked substance," said David Hufton of broker PVM. "The market correctly interpreted the presentation as bearish."
SHALE
Cheap oil has hit the economies of major crude producing countries hard and has been a major factor behind markets unrest in 2016.
In a sign of what might be in store, the Sovereign Wealth Fund Institute, a research organisation, said on Monday that national rainy-day funds might take a further $400 billion out of global equities this year if oil stays between $30 and $40. crude prices have also raised concerns that some U.S. shale oil producers could be forced into bankruptcy.
JPMorgan (N:JPM) JPM.N , the largest U.S. bank by assets, said on Tuesday it planned to increase provisions for expected losses on energy loans by $500 million. fall in stocks and oil pushed down yields on the lowest-risk government bonds. German 10-year yields DE10YT=TWEB fell 4.7 basis points to 0.13 percent, a 10-month low, and their U.S. equivalents US10YT=RR fell 5.7 bps to 1.69 percent.
Copper CMCU3 fell, partly on worries about demand from top consumer China, last trading down 1.2 percent at $4,591 a tonne.
Gold XAU= held on to most of Tuesday's gains, however, and was last at $1,235.86 per ounce.