* Yellen warns of waiting too long to raise rates
* Record-setting Wall Street sets tone
* Dollar on its best run since May 2012
By Jamie McGeever
LONDON, Feb 15 World stocks rose to a whisker
off all-time highs on Wednesday and the dollar rose for the 11th
straight day following Federal Reserve Chair Janet Yellen's
flagging of a possible interest rate rise next month.
The dollar notched up its longest winning streak in almost
five years after Yellen said on Tuesday the Fed would probably
need to raise rates at an upcoming meeting and that delaying
could leave the central bank's policymaking committee behind the
Propelled by record highs on Wall Street, MSCI's benchmark
global equity index rose 0.25 percent to 442.4 points
, its highest since May 2015 and two points off
its record high. It has not fallen for six sessions, its longest
such run since last July.
"The simple act of leaving a March (U.S.) hike on the table,
given that it had been all but written off by investors, is what
triggered such a reaction," said Craig Erlam, senior market
analyst at Oanda.
Europe's index of leading 300 stocks rose nearly 1
percent earlier to its highest since December 2015, but by
mid-session had settled back to trade up 0.4 percent on the day
at 1,465 points. Germany's DAX was up 0.2 percent and
Britain's FTSE was up 0.5 percent, boosted by sterling's
slide after soft UK wage growth data.
Yellen's remarks helped push Wall Street by boosting U.S.
bank stocks. Goldman Sachs shares hit a record high, and
are up 37 percent since the U.S. presidential election on Nov.
Financials also led the way in Europe, with Credit Agricole
up more than 3 percent after France's biggest retail
bank beat forecasts with a smaller than expected earnings drop
in the fourth quarter.
Six of the top 10 gainers in Europe were banks.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.7 percent, rising to its highest since
July 2015. Japan's Nikkei added more than 1 percent,
buoyed by a weaker yen.
U.S. futures pointed to a flat open on Wall Street.
The dollar index against a basket of major currencies
chalked up its longest winning streak since May 2015. It was up
0.2 percent at 101.220, near a four-week high of 101.380
Yellen's remarks rekindled expectations in some quarters for
the Fed to raise rates three times in 2017 rather than twice.
The futures market did not share this view amid doubts about the
U.S. economy's ability to sustain three hikes.
Yellen testifies to Congress again on Wednesday, this time
to the House of Representatives.
According to CME Group's FedWatch data, U.S. interest rate
futures implied an around 30 percent chance of at least
three increases this year, little changed from the previous day
- though the chance rose above 40 percent immediately after
"That kind of rate re-think is dollar-friendly, but too
timid to derail the risk rally that starts in U.S. equities and
spreads into emerging market currencies," said Kit Juckes, head
of FX strategy at Societe Generale in London.
The dollar was a shade higher at 114.40 yen after
rising to a two-week high of 114.50 the previous day, while the
euro slipped to a one-month low of $1.05525. It was last
Sterling was the big mover in FX, sliding 0.5 percent to
$1.2410 after figures showed that UK wage growth slowed
unexpectedly at the end of last year, thereby cooling
inflationary pressures and the need for tighter monetary policy.
The dollar was supported as U.S. Treasury yields rose on the
Fed Chair's comments, with the benchmark 10-year yield
climbing four basis points to an 11-day high of 2.50
percent the previous day. They were last at 2.48 percent.
The stronger dollar, which puts non-U.S. buyers of
dollar-denominated commodities at a disadvantage, weighed on
crude oil prices.
U.S. crude was down 0.6 percent at $52.86 a barrel
and Brent also shed 0.6 percent to $55.65 a barrel.
Crude already came under pressure the previous day on evidence
of surging U.S. stockpiles.
Spot gold was off 0.15 percent at $1,225.91 an ounce.
(Reporting by Jamie McGeever; Editing by Jeremy Gaunt)