* Rate hike speculation cools before Bernanke testimony
* Oil falls from 6-week highs; gold eases
* Gloomy euro zone data weighs
By Tamawa Desai
LONDON, Feb 23 (Reuters) - World stocks shed early gains and
the dollar rose on Tuesday as investor optimism subsided after
gloomy euro zone economic data and as expectations for rapid
monetary tightening faded.
U.S. stock futures were down 0.3 percent by midday European
trade, indicating a lower Wall Street open. MSCI's world equity
index <.MIWD00000PUS> fell 0.1 percent on the day, reversing
gains that took it to its highest since early February.
European shares <> were down 0.5 percent.
"There is a little bit of uncertainty. The market is still
trying to make up its mind. This time the bears and the bulls
are more or less in equilibrium, but I think that the bears will
soon get the upper hand again," said Philippe Gijsels, head of
research at BNP Paribas Fortis Global Markets in Brussels.
Investors will eye U.S. housing and consumer confidence data
due out later in the day for further clues to global recovery.
The dollar was 0.2 percent higher on the day against a
basket of currencies <.DXY>.
The euro turned lower against the dollar <EUR=> after the
German Ifo institute's business climate index fell to 95.2 in
February, lower than forecasts for 96.1. [].
"The Ifo survey is a big indicator for the euro zone economy
as a whole and the weak number certainly wasn't helpful for the
euro," said Paul Robson, currency strategist at RBS.
Euro zone government bond yields drifted lower on the weak
data as the market awaited a Greek bond issue.
Sterling fell sharply after Bank of England chief Mervyn
King said in parliamentary testimony the central bank could
increase quantitative easing if the economy worsens and the
recovery remained fragile. []
The BoE paused its 200-billion sterling asset buying
programme earlier this month.
BERNANKE EYED
U.S. Federal Reserve Chairman Ben Bernanke will testify to
congress on the central bank's exit strategies on Wednesday, but
speculation of a near-term rise in U.S. interest rates stemming
from a discount rate increase last week has cooled.
U.S. Treasuries edged higher although gains were limited
ahead of the next instalment of this week's record bond
issuance.
The 2/10-year Treasury yield spread held just a basis point
below Monday's 291 basis points, which was its widest since the
two-year maturity first started trading in the 1970s, on
expectations Bernanke would reiterate the central bank would
keep rates low for an extended time.
San Francisco Fed President Janet Yellen was the latest
policymaker to stress the move to raise the rate on emergency
loans was not a sign for rapid monetary tightening.
The U.S. economy still needed extraordinarily low interest
rates, as inflation was "undesirably low" and growth would
likely be sluggish for several years, she said on Tuesday.
[]
U.S. crude oil slipped from six-week highs to below $80
<CLc1> while gold prices <XAU=> eased as the dollar firmed.
(Additional reporting by Atul Prakash and Jessica Mortimer;
editing by Robin Pomeroy)
