(Adds close of European markets, graphic links)
* U.S. private sector jobs data widely beats forecasts
* Benchmark U.S. yields rise on jobs report
* Wall Street mostly gains, but Dow off slightly
* Crude oil falls sharply on U.S. supply report
By Herbert Lash
NEW YORK, March 8 (Reuters) - The dollar gained and stocks on Wall Street mostly rose on Wednesday after U.S. private sector hiring surged in February, underscoring the economy's strength and adding to expectations the Federal Reserve will raise interest rates next week.
The ADP National Employment Report showed private payrolls grew by 298,000 jobs last month, well above economists' expectations for a gain of 190,000. January's private payrolls gains were revised up to 261,000 from 246,000.
The report raised expectations of a robust U.S. Labor Department report for February payrolls on Friday.
Traders now see an 88.6 percent chance the Fed will raise rates by 25 basis points at its policy-setting meeting on March 15, up from 81.9 percent on Tuesday, according to the CME Group's FedWatch tool.
European stocks rose and a gauge of global equity markets pared most losses on the ADP report. But tumbling crude prices pushed down oil giants Exxon Mobil, Chevron and ConocoPhillips, among other energy companies.
The pan-European STOXX 600 index closed up 0.13 percent after declining the four previous sessions. MSCI's all-country world stock index was off 0.22 percent.
The likelihood the Fed will raise rates has not spooked investors, unlike the "taper tantrum" of 2013, because they perceive the economy is strong enough to withstand a rate hike and they see the need for a more normalized monetary policy.
"Even if the Fed raises rates next week, it would be to 75 basis points which is historically very low and is still considered very easy money," said Adam Sarhan, chief executive of 50 Park Investments in Orlando, Florida.
The benchmark S&P 500 and Nasdaq composite indexes rose, while the Dow industrials fell, pulled lower by energy and Caterpillar Inc, under government scrutiny for alleged tax fraud, according to The New York Times.
The Dow Jones Industrial Average fell 12.2 points, or 0.06 percent, to 20,912.56. The S&P 500 gained 1.77 points, or 0.07 percent, to 2,370.16 and the Nasdaq Composite added 21.96 points, or 0.38 percent, to 5,855.89.
The dollar rose to its highest level in five days, just below a two-month peak, while the euro fell to a five-day low after the payrolls data and ahead of a meeting of the European Central Bank on Thursday.
Traders and investors expect the ECB to maintain its loose monetary policy despite rising inflationary pressures.
The dollar has rallied by about 2.5 percent against a basket of major trading currencies over the past five weeks.
The dollar index gained 0.25 percent at 102.060. The dollar rose 0.39 percent against the Japanese currency to 114.41 yen and it edged up 0.16 percent to $1.0548 versus the euro.
Oil dropped further below $56 a barrel after an industry report pointed to a large rise in U.S. crude inventories, renewing oversupply concerns despite output curbs by the Organization of the Petroleum Exporting Countries.
U.S. crude inventories rose by a more-than-forecast 11.6 million barrels last week, data from industry group the American Petroleum Institute (API) showed on Tuesday
The U.S. Energy Information Administration reported on Wednesday that crude stocks rose by 8.21 million barrels, up from a forecast 1.9 million.
Brent crude, the international benchmark, was down $2.12 at $53.80 a barrel. U.S. crude fell $2.27 to $50.87.
The strong gain in private sector jobs pushed U.S. Treasury yields up, with benchmark yields hitting their highest levels since December.
The 10-year Treasury yield hit 2.583 percent, last seen on Dec. 20, before easing to 2.5488 percent, up almost 4 basis points from late on Tuesday, according to Thomson Reuters data.
Reporting by Herbert Lash; Editing by Nick Zieminski