* European stocks rise, Germany's DAX hits 1-month high
* Gold hits 3-1/2 month low on firmer dollar
* Oil prices edge higher in thin trade; OPEC eyed
(Adds close of European markets, updates prices, changes
dateline; previous LONDON)
By Chuck Mikolajczak
NEW YORK, May 30 (Reuters) - European shares reached a
four-week high on Monday and the dollar index touched a
two-month peak as investors braced for an interest rate hike
from the U.S. Federal Reserve.
The Fed should raise rates "in the coming months" if growth
picks up and the labor market continues to improve, Fed Chair
Yellen said on Friday. St. Louis Fed President James Bullard
chimed in, saying on Monday global markets appear to be
"well-prepared" for a summer rate hike, although he did not
specify a date for the policy move.
The possibility of a rate increase at the Federal Open
Market Committee's June 14-15 meeting was 28 percent, according
to CME's Fedwatch program. Bets on an increase at the July 26-27
policy meeting edged up to 61 percent, more than double the
level of a month ago.
"The stage is set, markets are ready for the curtain to be
drawn back," said Peter Kenny, senior market strategist at
Global Markets Advisory Group, in Berkeley Heights, New Jersey.
"The bottom line is, with relatively hawkish commentary out
of Bullard, which has been consistent, clear messaging by Chair
Yellen that we should expecting a move in the next few months,
markets are now well prepared and ready to embrace that."
Against a basket of currencies, the dollar was up 0.14
percent at 95.656 .DXY after climbing as high as 95.968, its
highest level since March 28.
The euro zone's blue-chip Euro STOXX 50 index .STOXX50E
was 0.38 percent higher at 3,125.43, while Germany's DAX
.GDAXI was up 0.46 percent after hitting a one-month high.
Trading volumes were thin as the London and New York markets
are closed for a public holiday.
MSCI's index of world shares .MIWD00000PUS edged up 0.03
percent. S&P 500 e-minis ESc1 were up 4.75 points, or 0.23
percent.
While higher U.S. interest rates would sap global liquidity,
Wall Street and European investors took Yellen's comments in
their stride, as they suggested the world's largest economy was
strong enough to weather another rate hike, following from the
December hike.
This week investors will keep an eye on the all-important
U.S. non-farm payrolls and the Institute for Supply Management
surveys. The May jobs report is due on Friday and a solid
reading could heighten expectations for a June move.
Economists expect U.S. employers to have added 161,000 jobs
this month, slightly more than they did in April. Hourly wages
are expected to show a 0.2 percent increase from the previous
month.
Crude oil futures remained shy of the $50 per barrel level
after marking weekly gains, feeling some pressure from the
stronger U.S. dollar that made it more expensive for holders of
other currencies.
Brent crude LCOc1 was last up to $49.72 a barrel, after
climbing above $50 for the first time in six months last week.
U.S. crude CLc1 was up 0.55 percent at $49.60.
The dollar's strength took a toll on spot gold XAU= , which
dropped 0.6 percent to $1,205.20 an ounce. It fell to $1,199.60
earlier in the day, its lowest since late February.