GLOBAL MARKETS-Bank shares lead stocks higher; dollar eases

                                
 * Global stocks hit seven-week highs, banks lead
                                
 * Dollar under pressure; yen eases on BoJ easing view
                                
 * China tightening speculation still in the mix
                                
 
                                
 By Ian Chua
                                
 LONDON, March 12 (Reuters) - Global stocks rose to their
best levels in seven weeks on Friday thanks to a boost by
financials, while reports an arch-dove was a leading candidate
for vice chair of the U.S. central bank unsettled the dollar.
                                
 U.S. stocks looked set to take a breather a day after the
S&P 500 index hit a 17-month closing high. Stock index futures
<DJc1><NDc1><SPc1> were a touch higher.
                                
 Market speculation that China would tighten monetary policy
imminently to rein in growth and inflation remained in the
background, analysts said, keeping investors cautious for now.
                                
 "China is still in the mix. The question is whether it'll be
a reserve ratio requirement adjustment or something bigger,
certainly the data we got from China was pretty strong this
week," said Kenneth Broux, market economist at Lloyds in London.
                                
 The pan-European FTSEurofirst 300 index of top shares
<.FTEU3> climbed 0.5 percent, with banks among the biggest
sector gainers.
                                
 Barclays <BARC.L>, Societe Generale <SOGN.PA>, BNP Paribas
<BNPP.PA> and Deutsche Bank <DBKGn.DE> were all up between 0.5
and 2.0 percent. 
                                
 Chances of a broad overhaul of U.S. financial regulation
dimmed on Thursday after bi-partisan Senate talks collapsed,
jeopardising a top Obama administration priority.
[ID:nN11219944] 
                                
 "This could have a significant affect on the way banks seek
to make money and so the breakdown in Senate talks is being seen
as a positive for bank stocks," said Joshua Raymond, market
strategist at City Index.
                                
 MSCI's world stock index <.MIWD00000PUS> rose 0.5 percent to
highs last seen on Jan. 20, on track for its second weekly
gains, while emerging markets equities <.MSCIEF> climbed 0.5
percent.
                                
 Earlier, Japan's Nikkei <.N225> advanced 0.8 percent with
exporters helped by a weaker yen.
                                
 Global stocks have been pushing higher since early February,
helped by recent improving sentiment around Greece's debt woes,
hopes for economic recovery and robust fund flows. Most major
equity indexes are now in positive territory for the year.
                                
 Still, Greece's fiscal crisis has been a drag on some fund
groups, said fund tracker EPFR Global, noting Europe Equity
Funds posted outflows of $502 million for the week ended March
10, the seventh weekly outflows in eight weeks.
                                
 In contrast, investors ploughed record amounts of cash into
emerging market and high yield bond funds that week.
[ID:nN11254915]
                                
 
                                
 DOLLAR PRESSURED
                                
 The euro rose to a one-month high against the dollar, which
fell broadly on the prospect that San Francisco Federal Reserve
Bank President Janet Yellen, a respected policy dove, could be
the next vice chairman of the Federal Reserve. [ID:nN11257901]
                                
 "The talk that Yellen, an arch-dove, was to become Fed vice
chairman would be negative for the dollar," said Adam Cole,
global head of FX strategy at RBC Capital Markets.
                                
 The dollar index, which tracks the performance of the
greenback versus a basket of six other major currencies, fell to
a three-week low of 79.692 <.DXY>. It was last down 0.6 percent
at 79.826.
                                
 Earlier, mounting expectations the BoJ will ease monetary
policy next week weighed on the yen. The euro scaled a
three-week peak of 124.64 yen <EURJPY=> and was last at 124.49,
up 0.5 percent.
                                
 Japan's prime minister and finance minister piled pressure
on the central bank on Friday, saying the government and the BoJ
should work together to beat deflation. [ID:nTOE62B065]
                                
 The weaker dollar helped support gains in oil and gold. U.S.
crude <CLc1> rose 0.5 percent to $82.55 a barrel, while copper
<MCU3=LX> drifted 0.3 percent higher to $7,485.00 a tonne.
                                
 Spot gold <XAU=> was at $1,114.90 an ounce, up about $5 from
New York's notional close on Thursday.
                                
 With stocks holding firm, government bond prices mostly
fell, driving yields higher.
                                
 The U.S. 10-year yield <US10YT=RR> edged up 0.8 basis points
to 3.735 percent, while the equivalent German Bund yield
<EU10YT=RR> gained one basis point to 3.186 percent.
 (Additional reporting by Joanne Frearson and Tamawa Desai;
editing by Ron Askew)