World stocks slipped on Thursday after the Federal Reserve cautioned that the U.S. economy would remain weak for a time, adding to concerns about the sustainability of a recent recovery.

Government bonds were under pressure as the Fed kept to its $300 billion Treasury debt buyback programme after a two-day meeting on Wednesday.

The U.S. central bank signaled it was less concerned about deflation, but it also said inflation would remain subdued for some time and interest rates would stay low for an extended period.

Investors are assessing what shape the recovery is likely to be and they are looking for tangible proof that positive forward-looking indicators will come to fruition, said Henk Potts, strategist at Barclays Wealth. MSCI world equity index fell a quarter percent. After hitting a 7-1/2 month high earlier this month, the benchmark index has been on a slight downward path, staying around five percent off the peak. On the year, the index is up around 5.8 percent.

The FTSEurofirst 300 index fell 0.7 percent, with chemical and basic resource shares being the biggest losers. Emerging stocks rose a half percent.

Investors are looking to a series of second-quarter corporate results due over the next few weeks to seek concrete evidence of an economic turnaround.

According to Thomson Reuters data, quarterly earnings are estimated to drop 34.5 percent for the S&P 500 index for the second quarter -- downgraded from 27 percent growth in July 2008 -- and fall by 21.4 percent in the third quarter.

In the fourth quarter, however, the earnings growth rate is expected to hit a whopping 180.2 percent -- thanks to some optimism about firms selling discretionary consumer goods and material firms. For full-year 2010 the rate is expected to rebound to 26.3 percent growth from the 11.2 percent fall estimated for this year.


The Fed's mixed word on the economy weighed on the Dow Jones industrial average on Wednesday while some technology shares were firmer, thanks to stronger-than-expected quarterly results from software maker Oracle.

The dollar rose 0.8 percent to 96.47 yen while it was steady against the euro at $1.3935. The U.S. currency was steady against a basket of major currencies.

The Fed basically left things unchanged ... What will ultimately happen seems to be the dollar being sold, while interest rates keep rising and stock prices fall after the Fed didn't express concerns about rising interest rates, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp in Tokyo.

U.S. crude oil fell 0.2 percent to $68.53 a barrel, weighed by data showing gasoline stocks in the United States rose 3.9 million barrels last week, exceeding analysts' expectations.

The September bund futures fell 18 ticks. U.S. Treasury prices were under pressure after the Fed with the benchmark 10-year yield up slightly at 3.7008 percent.

(Additional reporting by Simon Falush; editing by David Stamp)