* World stocks slip as Europe falls, emerging rise
* Wall Street set for small gains
* Portugal debt, Italian banks in focus
By Jeremy Gaunt, European Investment Correspondent
LONDON, March 29 (Reuters) - Concerns about Italian banks
dragged European stocks lower on Tuesday, undermining global
gains, while earlier euro strength dissipated.
Wall Street looked set to open slightly higher.
Portugal's debt remained under pressure, with yields on its
10-year bonds near record levels above 8 percent, complicating
the country's attempts to avoid a European Union bailout.
World stocks as measured by MSCI <.MIWD00000PUS> were down
0.2 percent, mainly as a result of weakness in Europe. The
global emerging market component <.MSCIEF> gained around 0.2
percent.
Italian lenders were down sharply after UBI Banca's <UBI.MI>
surprise announcement of a 1 billion euros ($1.4 billion)
capital hike.
Analysts said there were concerns that other banks might
follow suit, while investors also stayed cautious ahead of the
results of stress tests on Irish banks, due on Thursday.
The FTSEurofirst 300 <> index of top European shares
was down more than half a percent.
"We are still very cautious on the banking sector as a
whole," said Felicity Smith, fund manager at Bedlam Asset
Management. "The big problem is that they need to hold more
capital and that means in future, even if the economy grows, the
returns they generate would be lower."
Volume has begun to fall on European bourses in line with
2011 lows on Wall Street.
Some of this may reflect continuing uncertainty about how
the Japan disaster, turmoil in the Arab world and global
monetary policy will play out. But it could equally be a case of
locking in Q1 profits.
Investors have generally focused on the improving world
economy, but the crises and worries about inflation may be
taking some toll.
German consumer sentiment fell for the first time in 10
months going into April as concern about global issues and
inflation hit households.
The forward-looking GfK consumer sentiment indicator, based
on a survey of 2,000 Germans, fell to 5.9 for April from 6.0 for
March -- but this was still slightly above the 5.8 expected by
27 economists polled by Reuters.
EURO
The euro was slightly firmer against the dollar after
earlier strengthening on comments by European Central Bank
President Jean-Claude Trichet that reinforced expectations for a
rate rise next month.
The common currency had dipped on Monday after hawkish U.S.
policymaker comments lifted the dollar, but it failed to break
below $1.40 before it moved back up as Trichet said inflation
was "durably" above the ECB's target. []
Investors continued to focus on the prospect of higher rates
and to shrug off the euro zone debt crisis, despite concerns
about Portugal's ability to finance itself as the country
prepared for a snap election. []
The euro <EUR=> was up less than 0.1 percent at $1.4087.
German government bonds were flat with Portuguese debt under
pressure.
(Additional reporting by Atul Prakash, Jessica Mortimer and
Richard Leong; Editing by Hugh Lawson/Ruth Pitchford)
