(Updates with BoE/ECB decision, Wall Street outlook)
By Natsuko Waki
LONDON, May 8 (Reuters) - World stocks retreated on Thursday
from this week's four-month high on concerns over the banking
sector, while the dollar hit a two-month peak after a report
that U.S. and European officials wanted the currency to
strengthen.
European banking stocks fell 1 percent after the U.S.
Securities and Exchange Commission said on Wednesday it is
scrutinising the liquidity of investment banks it supervises and
is planning to require top Wall Street firms to disclose their
current liquidity and capital positions publicly.
The day's other loser was the euro after the Financial Times
reported U.S. and European officials are now united in their
wish to see the dollar strengthen against the euro. European
Union officials played down the report on Thursday, with some of
them saying they knew of no such discussion.
"Until now it seems to be an open door policy for dollar
weakness but clearly there are limits," said Mitul Kotecha, head
of global foreign exchange research at Calyon.
"The change is the fact that there will be a perception that
U.S. officials do see limits in this move in the dollar."
The FTSEurofirst 300 index <> was down 0.1 percent
while MSCI's main world equity index <.MIWD00000PUS> dropped
0.3 percent, after hitting its highest since January on
Wednesday. The euro hit a two-month low of $1.5287 <EUR=> while
the dollar rose 0.2 percent against major currencies <.DXY>.
Both the Bank of England and European Central Bank left
interest rates on hold as expected. In the case of the BoE
however, many expect the bank will cut rates next month for a
fourth time since December to shore up the economy.
"They are going to need to cut again but they don't want to
do things too fast," said Graham Secker, UK equity strategist at
Morgan Stanley.
"Inflation is still a little bit problematic and they will
want to wait to see hard evidence that what appears to be a
meaningful slowdown in March and April is beginning to take
hold."
U.S. stock futures were up 0.4 percent <SPc1>, pointing to a
firmer open on Wall Street later after Costco Wholesale Corp
<COST.O> and Wall-Mart Stores <WMT.N> reported
higher-than-expected monthly sales figures.
OIL OFF RECORD
Oil steadied below Wednesday's record level, with U.S. light
crude <CLc1> falling 0.4 percent on the day to $122.96 a barrel
after hitting an all-time high of $123.93 on Wednesday.
Supply worries and strong demand from emerging economies
have pushed crude prices up sixfold since 2002.
A recovery in stocks and credit market assets since early
April has shifted investor focus to inflation risks from surging
energy, food and other commodity prices, which can erode
corporate profits and cause the world's central banks to raise
interest rates again.
Emerging sovereign spreads <11EMJ> widened 1 basis point
while emerging stocks <.MSCIEF> were down 1 percent.
The June Bund future <FGBLM8> was up 30 ticks.
Gold <XAU=> was steady at $870.85 an ounce.
(Additional reporting by Veronica Brown and Michael Taylor)
