GLOBAL MARKETS-Europe shares rally, dollar drops as investors see Dec rate hike

* European shares touch three-month highs
* U.S. flat in choppy trade after day-earlier rally
* Dollar eases from highs after four sessions of gains
* U.S. crude dips below $40 a barrel

(Updates to early afternoon)
By Lewis Krauskopf
NEW YORK, Nov 19 (Reuters) - Key stock markets in Europe and
Asia rallied on Thursday as expectations built that the U.S.
Federal Reserve will hike interest rates next month, while the
U.S. dollar retreated after four sessions of gains.
U.S. stock indexes were little changed in choppy trading
after a strong rally in the previous session, while U.S. crude
dipped below $40 a barrel before rebounding.
U.S. data showed fewer Americans filed for unemployment
benefits last week, further supporting the view that the Federal
Reserve will raise interest rates in December. urn:newsml:reuters.com:*:nL1N13E113
"This morning's data simply confirmed that the economic
landscape is healthy enough for the Fed to continue with its
desired timing for liftoff, which for now the market is
expecting to be December," said Ian Lyngen, senior government
bond strategist at CRT Capital in Stamford, Connecticut.
Futures traders on Thursday placed a 72-percent chance of
the Fed raising rates next month, up from 68 percent following
the release of the Fed minutes on Wednesday afternoon, according
to the CME Group's FedWatch.
The Dow Jones industrial average .DJI rose 1.24 points, or
0.01 percent, to 17,738.4, the S&P 500 .SPX lost 1.25 points,
or 0.06 percent, to 2,082.33 and the Nasdaq Composite .IXIC
added 8.14 points, or 0.16 percent, to 5,083.34. urn:newsml:reuters.com:*:nL3N13E452
The healthcare sector .SPXHC weighed on the benchmark S&P
500 index after insurer UnitedHealth Group (N:UNH) UNH.N cut its
profit forecast. urn:newsml:reuters.com:*:nL3N13E3BY
The pan-European FTSEurofirst 300 index .FTEU3 climbed 0.4
percent, helped by a jump in shares of food and facilities group
Sodexo EXHO.PA , which said it would cut costs to cope with a
volatile global economy. urn:newsml:reuters.com:*:nL8N13E2P4
Markets in London .FTSE and Frankfurt .GDAXI were up 0.8
percent and 1.1 percent, respectively. Japan's Nikkei .N225
rose 1.1 percent, and an index of major global markets rose 0.7
percent.
The U.S. dollar index .DXY , measured against a basket of
currencies, was off 0.7 percent after hitting a seven-month high
a day earlier. The euro rose EUR= 0.7 percent against the
dollar. urn:newsml:reuters.com:*:nL1N13E1IU
"That the dollar is lower signals that this outcome (of the
December Fed meeting) is increasingly discounted, particularly
in the wake of recent, very heavy USD buying," said Todd Elmer,
Citi's Asian head of G10 FX strategy.
Yields on longer-dated Treasuries fell as investors braced
for the Fed to gradually raise rates after December.
urn:newsml:reuters.com:*:nL1N13E1DF
Benchmark 10-year Treasury US10YT=RR prices rose 10/32 for
a yield of 2.2342 percent, while the price for the 30-year note
US30YT=RR rose 31/32 for a yield of 2.9928 percent.
U.S. crude CLc1 was down 1.3 percent at $40.21 a barrel,
after dipping below $40 for a second day, with rising U.S.
stockpiles serving as the most visible evidence of oversupply in
oil markets. Brent crude LCOc1 slipped 0.2 percent to $44.07 a
barrel. urn:newsml:reuters.com:*:nL3N13E12N
"Ultimately the focus will return to the balance of demand
relative to supply, and until inventory data provides evidence
of a tighter supply, the path of least resistance will be
lower," CMC Markets chief market analyst Michael Hewson said.
Spot gold XAU= rose 1.2 percent, rebounding from near
six-year lows.
"I think this is pre-Thanksgiving week short-covering which
has its roots in the Fed minutes yesterday," said Simon Weeks,
head of precious metals at the Bank of Nova Scotia.

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Global assets in 2015 http://link.reuters.com/dub25t
Currencies vs dollar http://link.reuters.com/tak27s
Commodities performance http://link.reuters.com/rac73w
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