LONDON, May 8 (Reuters) - World stocks retreated on Thursday from this week's four-month high as record oil prices stoked inflation concerns, while the dollar hit a two-month peak after a report that U.S. and European officials wanted the currency to strengthen.
Oil held near Wednesday's record above $123 a barrel after supply worries and strong demand from emerging economies which 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.
The European Central Bank and the Bank of England are set to leave interest rates steady later on Thursday. The ECB has kept its anti-inflation stance although signs have increased that the economy is losing momentum.
"The dilemma for global economies is potentially slowing growth and emerging inflation pressures," said Greg Goodsell, equity strategist at ABN AMRO in Australia.
"It will be the task for central banks around the world to manage that quite carefully because they tend to suggest opposite policy reaction in terms of interest rates."
The FTSEurofirst 300 index was down 0.6 percent while MSCI's main world equity index dropped half a percent, after hitting its highest since January on Wednesday.
Banking stocks were down nearly 1.2 percent after the U.S. Securities and Exchange Commission said 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 euro hit a two-month low of $1.5287 while the dollar rose 0.2 percent against major currencies after the Financial Times reported U.S. and European officials are now united in their wish to see the dollar strengthen against the euro.
"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 ECB is expected to leave interest rates at 4 percent as inflation in the euro zone remain well above the central bank's comfort zone. The BoE is also set to keep rates on hold at five percent, although many see it cutting again next month for a fourth time since December to shore up the economy.
Emerging sovereign spreads widened 1 basis point while emerging stocks were down 1.3 percent.
The June Bund future rose 50 ticks.
U.S. light crude was down 0.1 percent at $123.38 a barrel after hitting an all-time high of $123.93 on Wednesday.
Gold slipped to $866.00 an ounce.
(Additional reporting by Veronica Brown; Editing by Gerrard Raven)
