World stocks slip again

By Natsuko Waki

LONDON (Reuters) - World stocks slipped back towards this week's five-month low on Friday as oil prices near record highs kept inflation concerns alive a day after the European Central Bank raised interest rates.

The euro failed to benefit much from the ECB's quarter point rate hike on Thursday and the region's government bonds rose as President Jean-Claude Trichet said he had no bias on monetary policy, dousing speculation about aggressive rate hikes this year.

A less hawkish tone from Trichet, followed by U.S. job data which came in line with expectations, provided only short-term solace for equity investors.

"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," Gerhard Schwarz, head of global equity strategy at UniCredit in Munich, Germany.

"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 0.4 percent while MSCI main world equity index was down 0.1 percent, having hit its lowest since January on Thursday.

EMERGING FALLOUT

Emerging sovereign spreads tightened 2 basis points while emerging stocks fell 0.4 percent.