* European stocks fail to match Wall Street records
* Fed minutes to reinforce rate hike conviction
* German bond yields bounce off lows on ECB loan plan
* Gap between U.S.-German yields near 11-year high
By John Geddie
LONDON, Nov 23 European shares dipped and German
bond yields briefly touched record lows on Wednesday, a contrast
with the buoyant mood on Wall Street as investors focused on
diverging growth and interest rate prospects in Europe and the
U.S. stocks were set to hold on to gains after the
Dow closed above 19,000 for the first time on Tuesday,
with investors anticipating a growth boost under President-elect
Donald Trump and a rate hike from the Federal Reserve -
expectations that should be reinforced by minutes released later
With European policymakers leaning the other way,
reaffirming their commitment to an easy approach, and banking
worries rattling the bloc's stock markets, the single currency
held near one-year lows.
The dollar, meanwhile, is perched near a 14-year high.
The transatlantic split has been most stark in bond markets,
with the falling yields on two-year German paper keeping the gap
to U.S. equivalents near an 11-year high.
In Britain, sterling was a tad weaker at $1.2396
before a budget update from finance minister Philip Hammond.
Hopes for fiscal stimulus have been lowered as the government
has stressed its borrowing limits.
"We do like policy divergence trades," Rabobank strategist
Lyn Graham-Taylor said.
"I think markets had been a bit euphoric in the wake of
Trump and now they are coming around to the understanding that
there is not going to be fiscal stimulus that is going to be
good for everyone."
Weighed down by Italian banking stocks, euro zone shares
shed 0.3 percent, failing to match the exuberance in
Asia, where stocks gained 0.7 percent to strike
a one-week high, and Tuesday's rally in the U.S.
With Japan on holiday, Australia's main index led
the action in Asia with a rise of 1.35 percent to a one-month
top, helped by strength in bulk commodity prices.
China's blue-chip CSI300 index advanced 0.5
percent to a near 11-month peak as the yuan touched its lowest
in six years.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
YIELD GAP UNDERMINES EURO
With equities in demand, U.S. bonds were getting the cold
shoulder. Two-year note yields rose as far as 1.107
percent on Tuesday, the highest since April 2010.
Euro zone yields have been heading in the opposite direction
and some solid growth data did little to shake expectations for
more monetary easing from the European Central Bank next month.
That saw yields on German two-year paper hit a record low of
minus 0.74 percent early on Wednesday. That move
kicked into reverse after a report that the ECB is looking to
lend out more bonds to avert a market freeze, although the gap
to U.S. Treasuries remains near its widest since 2005.
That gap kept the euro pinned at $1.0624, not far
from last week's one-year trough at $1.0569. Against a basket of
currencies, the dollar was flat at 101.03, very close to a
The dollar also kept most of its recent hefty gains on the
yen at 111.04, though it has met resistance around 111.35
in the last couple of sessions.
Emerging markets have struggled in recent days as surging
U.S. bond yields sucked much-needed capital out of Asia. Trump's
past talk of trade tariffs has also weighed on sentiment in the
Analysts at JPMorgan said Trump's pledge to dump the
Trans-Pacific Partnership was already priced into markets.
"What may not be factored in is the possibility of
follow-through on other, more protectionist campaign proposals,"
they wrote in a note to clients.
"We remain concerned about this as a source of downside
risk, delivering a negative surprise to markets which so far
appear to be enamored of his emphasis on fiscal stimulus and
deregulation since the election."
Elsewhere, oil prices edged higher but gains were capped by
investors' doubts that oil cartel OPEC would agree to a large
enough production cut to significantly reduce a global surplus
when it meets next week.
Brent crude rose 25 cents to $49.37 a barrel, while
U.S. crude rose 20 cents to $48.22.
Industrial metals advanced on talk of demand from China and
the whole global reflation trade. Copper was near a 16-month
high, while iron ore futures <0#DCIO:> surged 8 percent on the
back of higher steel prices.
(Additional reporting by Wayne Cole in Sydney; Editing by Mark