* European stock market mostly flat, US futures dip
* Some caution before Fed’s Yellen testimony on policy
* China inflation picks up
* Dollar pressured after Trump’s national security aide quits
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh (Updates prices, adds UK data)
By Dhara Ranasinghe
LONDON, Feb 14 (Reuters) - Stocks flatlined and the dollar dipped on Tuesday as caution set in before testimony from Federal Reserve chief Janet Yellen that may offer clues to the timing of the next U.S. interest rate rise.
Adding to pressure on the dollar was the resignation of President Donald Trump’s national security adviser Michael Flynn, who quit over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office, and misled Vice President Mike Pence about the conversations.
The prospect of Trump-led economic stimulus in the United States has underpinned the dollar and stocks in recent days, powering U.S. equity markets to record highs on Monday and helping Asian shares to hit 19-month peaks on Tuesday.
But the buoyant mood in global markets was tempered somewhat as attention turned to semi-annual testimony by Yellen on Tuesday and Wednesday that could highlight the likelihood of two or more U.S. interest rate hikes this year.
Dallas Fed President Robert Kaplan on Monday argued that the Fed should move soon to avoid falling behind the curve, especially as fiscal policy could drive faster growth and inflation.
“If Yellen wants March to be a live meeting as other Fed officials have suggested it is, she will have to adopt a more hawkish tone beyond the usual reference to data dependency,” said ING senior rates strategist Martin van Vliet.
“Currently we calculate a market implied probability of around 17 percent for a March rate hike.”
The STOXX 600, Europe’s leading index of top 600 shares, dipped 0.1 percent to 369.73 points, off more than one-year highs hit on Monday.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, trying for its fifth straight session of gains.
Japanese shares ran into trouble after Toshiba Corp delayed an anxiously awaited earnings release.
After a day of delay and confusion, Toshiba said it would take a $6.3 billion hit to its U.S. nuclear unit, a writedown that wipes out its shareholder equity and leaves the loss-making group scrambling for capital.
There was some eye-catching data from China, where producer price inflation picked up more than expected in January to near six-year highs, while consumer price inflation neared a three-year high.
Adding to signs of a pick-up in inflation globally, other data on Tuesday showed British consumer prices rose last month at the fastest pace sine June 2014.
U.S. stock market futures were just a touch lower.. U.S. stock indexes hit historic peaks on Monday, with the benchmark S&P 500’s market value topping $20 trillion as investors bet tax cuts promised by Trump would boost the economy.
The dollar stumbled against major currencies after Flynn’s resignation and as investors looked ahead to Yellen’s testimony.
The dollar index dipped 0.2 percent against a basket of currencies to 100.78, while the euro was 0.3 percent firmer after three sessions of losses to stand at $1.0628.
Sterling was the biggest currency mover, falling 0.5 percent against the dollar after the UK inflation numbers came in lower than expected.
In commodity markets, metals were on a tear thanks to supply disruptions and strong Chinese demand.
Aluminum touched its highest in 21 months on renewed concerns about potential closures of Chinese smelters to cut pollution, while copper also extended gains.
Oil recouped some ground on OPEC-led efforts to cut output, though rising production elsewhere kept prices to a narrow range that has contained them so far this year.
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 Wayne Cole in SYDNEY; Editing by Mark Trevelyan and Gareth Jones)