* MSCI world index down 0.3 percent at 345.87
* World stocks under pressure again, approaches 5-month low
* Euro near 1-week low after Trichet calms rate expectations
* Oil steadies below $144 a barrel
By Natsuko Waki
LONDON, July 4 (Reuters) - World stocks slipped back towards
this week's five-month low on Friday as steadying oil prices
failed to erase concerns about slowing economic growth and
rising inflation, and as banking stocks came under renewed
pressure.
The euro failed to benefit much from the European Central
Bank's quarter percentage point interest rate rise on Thursday,
and the region's government bonds rose after President
Jean-Claude Trichet said he had no bias on monetary policy,
dousing speculation about aggressive rate increases this year.
A less hawkish tone from Trichet, followed by U.S. job data
which was in line with expectations, gave equity investors only
short-term solace.
Exerting pressure on banking stocks, investment bank Goldman
Sachs lowered its price targets for over 40 banks, saying that
the sector was weighed down by the risk that banks will need to
raise extra capital.
"We cannot get any big relief as long as the overall
stagflation fears hang over the market, and the oil price is a
major factor in this. There will be a wave of downward pressure
on equities after any recovery," said Gerhard Schwarz, head of
global equity strategy at UniCredit in Munich.
"The big question on equity markets is: how far will the
derating go, and when will valuations find a bottom as we
consider inflationary pressures not seen in two and a half
decades?"
The FTSEurofirst 300 index <> fell 0.8 percent while
MSCI main world equity index <.MIWD00000PUS> was down 0.3
percent, having hit its lowest level since January on Thursday.
U.S. markets are closed for the Independence Day holiday.
EMERGING FALLOUT
Emerging sovereign spreads <11EMJ> tightened 2 basis points
while emerging stocks <.MSCIEF> fell 0.3 percent.
Analysts say emerging markets, especially in Asia, will be
more severely hit by the rising energy costs.
"The monumental energy price increases will be a
`game-changer' for Asia, in our view," said Stephen Jen, head of
global currency research at Morgan Stanley.
"While there is some scope for remedial policy action to
`amortise' this shock, Asia ex-Japan currencies will likely
weaken against the dollar and assets should underperform in the
period ahead."
The dollar was steady on the day, keeping gains against the
euro made after U.S. payrolls data and Trichet's comments. The
euro hit a one-week low of $1.5654 <EUR=>.
The September Bund future <FGBLU8> rose 32 ticks.
U.S. light crude <CLc1> fell nearly 1 percent to $143.97 a
barrel, although investors are bracing for a rise to $150 in the
coming sessions.
Gold <XAU=> fell to $931.70 an ounce.
(Additional reporting by Sitaraman Shankar; editing by David
Stamp)
