GLOBAL MARKETS-Rate outlook hurts euro bonds, stocks weaker

* Rate expectations send Bund yield above 3.5 percent

* World stocks flat to lower

* Wall Street set for gains

By Jeremy Gaunt, European Investment Correspondent

LONDON, April 11 (Reuters) – Expectations of another rise in
European Central Bank interest rates by July kept the euro close
to recent highs on Monday and pushed euro zone government bond
prices lower.

World stocks were weaker, although Wall Street looked set to
open higher as its latest corporate earnings loomed.

Although the world economy is fairly robust, there are
growing expectations among investors that accompanying higher
commodity prices will drive up inflation and prompt central
banks to tighten monetary policy sooner.

Oil prices dipped on Monday on hopes of a settlement in
Libya, but they remain high and technicals suggested Brent
(LCOc1: Quote, Profile, Research) could soon be heading towards $130 a barrel.

The ECB raised its benchmark rate by 25 basis points last
week to 1.25 percent, the first hike since 2008, and used
language suggesting that another rise is in the pipeline.

U.S. Federal Reserve officials, in the meantime, have been
making more hawkish comments, calling into question the future
of its asset-buying quantitative easing programme.

“This week, perhaps, the focus could be on whether the
Federal Reserve actually indicates to the market whether they
will be exiting their loose monetary policy, and whether they
display any hawkish signals,” said Ong Yi Ling, investment
analyst at Phillip Futures in Singapore.

One result of the mood was to send core euro zone debt
yields higher, with Bund yields (DE10YT=TWEB: Quote, Profile, Research) above 3.5 percent
from the first time since August 2009.

In the euro zone’s debt crisis, a German magazine reported
on Saturday that some euro zone finance ministers had told the
ECB they have doubts Greece will meet its fiscal targets and
suggested it restructure its debt. [ID:nLDE738064]

The euro touched its highest against the yen since May 2010
of 123.33 yen (EURJPY=R: Quote, Profile, Research) on trading platform EBS. It later gave
up some of those gains and was last down at 122.52 yen.

It was down nearly 0.2 percent to $1.4457 (EUR=: Quote, Profile, Research), having hit
a 15-month high of $1.4489 on Friday.


On commodity markets, tin hit a record and lead scaled a
three-year high on the London Metal Exchange.

Gold jumped to a lifetime high for a fifth session, topping
$1,476 an ounce.

World stocks as measured by MSCI (: Quote, Profile, Research)MIWD00000PUS> were flat,
with emerging markets (.MSCIEF: Quote, Profile, Research) off 0.3 percent.

European stocks fell as caution built before the next round
of corporate earnings reports. The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research)
index of top European shares was down 0.2 percent.

“Investors seem too complacent at the moment, ahead of the
earnings season,” said Frederic Buzare, global head of equity
management at Dexia Asset Management. “I’m cautious on the short
term for stocks.”

(Additional reporting by Saikat Chatterjee, Blaise Robinson
and Anirban Nag; Editing by Patrick Graham)

GLOBAL MARKETS-Rate outlook hurts euro bonds, stocks weaker