* Europe stocks dip after Wednesday's big gains, Asia rises
* Dollar gains strongly vs yen, up vs euro and sterling
* German 10-yr yields up as euro zone inflation hits 2 pct
* Oil falls for third day, stronger dollar weighs on metals
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, March 2 European stocks held near
15-month highs and the dollar strengthened against other top
global currencies on Thursday on growing expectations the U.S.
central bank will raise interest rates later this month.
Wall Street looked set to open barely changed after touching
a record high on Wednesday, partly on the rates outlook, which
was seen as a sign of confidence in the world's largest economy.
Federal Reserve Governor Lael Brainard became on Wednesday
the latest central bank official to signal that a hike may be in
the offing, saying an improving global economy and a solid U.S.
recovery meant it would be "appropriate soon" to raise rates.
Federal fund futures prices suggest markets see a 72 percent
chance of a 25 basis point hike at the March 14-15 meeting.
European shares held steady after Wednesday's strong showing
and gains on Asian bourses, that helped push MSCI's global
stocks index to another record high.
Although higher interest rates would raise U.S. companies'
costs, they are also being viewed as a sign of confidence in the
economy. Fed Chair Janet Yellen is due to speak on the economic
outlook in Chicago on Friday.
The pan-European STOXX 600 index was unchanged
after adding 1.5 percent on Wednesday and hitting its highest
since December 2015, as losses on real estate companies offset
gains in utilities.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.1 percent, while Japan's Nikkei
closed up 0.9 percent after hitting a 14-month high as a weaker
yen helped exporters.
The dollar index, which measures the greenback
against a basket of six major currencies, hit a seven-week high,
up 0.3 percent.
The euro fell 0.3 percent to $1.0514, the yen fell
0.6 percent to 114.40 per dollar and sterling was flat
at $1.2286, having earlier touched a six-week low at $1.2257.
In fixed income markets, U.S. Treasury yields pushed higher.
Rate-sensitive two-year yields matched
Wednesday's peak of 1.308 percent, their highest since 2009.
German 10-year yields were higher on the day
after data showing euro zone inflation hit the European Central
Bank's 2 percent target last month, as expected.
Some analysts said the pick-up in inflation could fuel talk
of a scaling back, or tapering, of the ECB's stimulus programme,
which has driven euro zone bond yields lower.
"Psychologically, 2 percent inflation could be important and
there will be more pressure building on the ECB to taper --
especially if the economy continues to grow," said KBC
strategist Piet Lammens.
Oil prices fell for a third consecutive day after a record
build-up in U.S. crude inventories and data showing Russian oil
production was unchanged last month, signalling a pause in
Moscow's efforts to curb production under a deal struck with the
OPEC producers' club. Brent crude fell 79 cents to
$55.57 a barrel.
"There is a very stale smell hanging over the market," Ole
Hansen, head of commodity strategy at Saxo Bank in Copenhagen,
told Reuters Global Oil Forum.
"I still see the risk of $50 a barrel before $60 on Brent,
but have to acknowledge that we have so far seen very limited
The stronger dollar weighed on metals prices, which wee
buoyed however, by signs of growing demand. Chinese factory
activity expanded faster than expected in February, purchasing
manager data showed on Wednesday.
Copper, a key Chinese import, fell 0.8 percent to
$5,964 a tonne.
Gold fell 0.7 percent to $1,239 an ounce.
For Reuters Live Markets blog on European and UK stock
markets, see: reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Hideyuki Sano in Tokyo, John Geddie,
Dhara Ranasinghe and Christopher Johnson in London; Editing by