European stocks held near 15-month highs and the dollar strengthened against other top global currencies on Thursday on growing expectations that the US central bank will raise interest rates later this month.
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 US recovery meant it would be “appropriate soon” to raise rates.
Federal fund futures prices suggest markets see a 70 per cent chance of a 25 basis point hike.
European shares dipped after Wednesday's strong showing, gains on Asian bourses and new record highs on Wall Street.
Although higher interest rates would raise US companies' costs, they are also being seen as a sign of confidence in the economy and, along with US President Donald Trump's speech to Congress, were cited as factors behind Wall Street's rise.
Fed Chair Janet Yellen is due to speak on the economic outlook in Chicago on Friday.
The pan-European STOXX 600 index fell 0.1 per cent after adding 1.5 per cent on Wednesday and hitting its highest since December 2015, as losses on consumer-related stocks outweigh gains in healthcare and miners.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent, while Japan's Nikkei closed up 0.9 per cent 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.
The euro fell 0.1 per cent to $1.0535, the yen fell 0.5 percent to 114.26 per dollar and sterling was flat at $1.2290, having earlier touched a six-week low around $1.2260.
The prospect of higher rates and a potential $1-trillion boost to US infrastructure sought by Trump pushed US Treasury bond yields higher on Wednesday, but they pulled back from those highs on Thursday.
Rate-sensitive two-year yields edged up to 1.292 per cent, off Wednesday's peak of 1.308 per cent, its highest since 2009.
German 10-year yields pulled back from the day's highs after data showing euro zone inflation hit the European Central Bank's 2 per cent target last month, as expected.
ING's global head of debt and rates strategy Padhraic Garvey said prior to the data that such a reading could extend the bearish momentum in bonds.
Oil prices for a third consecutive day after data showed a record build-up in US crude inventories. Brent crude fell 11 cents to $56.25 a barrel.
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 0.3 per cent to $5,995 a tonne.
Gold fell 0.3 per cent to $1,245 an ounce.