By Carolyn Cohn

LONDON (Reuters) - World stocks dipped toward the previous session's four-week lows on Tuesday as investors continued to fret over the early removal of government stimulus, particularly in the financial sector.

Positive U.S. manufacturing and home sales data buoyed U.S. stocks on Monday but investors worry that signs of recovery will lead governments to cut economic and fiscal support, a fear that has contributed to a reversal of equities' seven-month rally.

CIT Group INC <CIT.N>, a U.S. lender to hundreds and thousands of small and medium-sized businesses, filed for bankruptcy on Sunday, underscoring the continuing fragility of parts of the financial sector.

European shares hit four-week lows as poor results from Swiss bank UBS <UBSN.VX> and a shake-up of UK banks Lloyds and Royal Bank of Scotland <RBS.L> rattled investors.

Lloyds launched a record 13.5 billion pound ($22 billion) rights issue and along with RBS agreed to sell off businesses as part of a complex deal to limit reliance on government support.

"UBS just posted ugly results that bode ill for European bank results and CIT just filed for bankruptcy. This raises the question: isn't it too early to pay back government money?" said David Thebault, head of quantitative sales trading at Global Equities in Paris.

World stocks as measured by MSCI <.MIWD00000PUS> fell 0.6 percent to 281.32. The index rallied by 75 percent between early March and late Oct on growing optimism over the global economy, but fell 4 percent last week.

The FTSEurofirst 300 <.FTEU3> index of top European shares fell 1.5 percent to a four-week low, losing ground for the sixth time in nine sessions. Riskier emerging market shares <.MSCIEF> fell 1.0 percent.

ACTION-PACKED WEEK

The dollar edged up against the euro but fell 0.4 percent against the yen. Currency markets are likely to trade cautiously ahead of a raft of key events this week.

The Federal Reserve starts a two-day meeting on interest rates on Tuesday, the European Central Bank and Bank of England make rate decisions on Thursday, U.S. employment data is due on Friday and G20 finance ministers meet in St Andrews, Scotland, this weekend. Continued...