World stocks fall on financial shares, oil drops

By Elzio Barreto

SAO PAULO (Reuters) - World stocks edged lower on Friday, getting no relief from a decline in crude prices as concerns of further banking write-downs weighed on financial shares.

Oil prices fell more than a dollar a barrel after Iran responded to an incentives package offered by six world powers in a bid to resolve a dispute over its nuclear development program.

But the decline in crude prices was not enough to give markets a boost, with European shares slumping after Goldman Sachs said banks may need to raise 60-90 billion euros in total. The broker lowered 2008-09 estimates for than 40 banks and said the sector would be hampered by the risk of additional capital raisings.

"It has become almost 'politically incorrect' to have banking stocks in a portfolio," said Alain Bokobza, head of strategy at Societe Generale in Paris.

The euro hit a one-week low against the U.S. dollar but gave up losses after European Central Bank President Jean-Claude Trichet said he had no bias on monetary policy, dousing speculation about aggressive rate hikes this year. The ECB raised rates a quarter percentage point on Thursday.

Gold was steady in light trading with New York markets closed for the U.S. Independence Day holiday. But copper, zinc and other metals fell as worries about supply disruptions in Peru, where union support for a nationwide mining strike was collapsing.

Trading in Latin American stocks was slower than usual because of the U.S. holiday, with markets in Chile and Mexico posting modest gains and Brazil's bourse edging lower.

"The market is going to trade sideways with the closing there (in the United States)," said Junior Hydalgo, director of Trust Investimentos in Sao Paulo.