By Daniel Bases

NEW YORK (Reuters) - Global stock markets sagged and the U.S. dollar rally lost steam on Tuesday as concerns about the credit-stressed world economy's growth prospects resurfaced and overshadowed a further decline in oil prices.

Losses stemming from the mortgage crisis in the United States undercut a two-day surge in U.S. stocks and prompted investors to lock in some profits.

Bank stocks led the decline after No. 3 U.S. bank JPMorgan Chase (JPM.N: Quote, Profile, Research) said it has taken another $1.5 billion in losses in the current quarter and Swiss bank UBS (UBSN.VX: Quote, Profile, Research) reported worse-than-expected losses as a result of the credit crisis.

The dollar index, which tracks the U.S. currency against a basket of currencies slipped to 76.225, down 0.11 percent on the day. Earlier it hit a six-month high of 76.616, rising more than 7.4 percent in five weeks.

"The dollar rally has temporarily stalled with players looking to take profit on recent out-sized moves," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon.

In June, when the dollar was well below its current levels it helped push exports higher and overpower then record-high prices for imported oil. That resulted in an unexpected narrowing of the U.S. Trade deficit to $56.8 billion, down from a revised estimate of $59.2 in May, data showed on Tuesday.

In response to falling stocks and commodity prices, government bonds rallied in the United States and Europe. A drop in oil prices eased some concerns about inflation pressures but also showed global demand was slowing.

Earlier on Tuesday, European Central Bank Executive Board member Lorenzo Bini Smaghi told Italian newspaper Il Messaggero that growth in the European economy is slowing down faster than expected.