* S&P rises to record close
* Fed expected to unveil balance sheet trim this week
* Dollar up against the yen (Updates with U.S. markets closing levels)
By Caroline Valetkevitch
NEW YORK, Sept 18 (Reuters) - An index of world stocks hit a record high on Monday and the dollar rose to a more-than seven-week peak against the yen as investors awaited clues from the U.S. Federal Reserve on the timing of further rate hikes, while tensions over North Korea eased.
On Wall Street, the Dow had a record close for the fifth session in a row while the S&P set a closing record for the second consecutive session, led by gains in financial shares. Rising U.S. Treasury yields boosted financial stocks, with higher interest rates expected to boost bank profits.
A relatively quiet North Korea and U.S. Secretary of State Rex Tillerson's comments on a "peaceful solution" over the weekend eased some concerns for investors.
But an address by U.S. President Donald Trump to world leaders at the United Nations on Tuesday and elections in Germany and New Zealand will add extra political uncertainty to the mix this week.
The main event, however, will be the Fed's meeting on Tuesday and Wednesday, at which it is likely to take another step toward policy normalization in what is rapidly becoming a worldwide trend.
The central bank is expected to announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
Investors are far from persuaded the Fed will move on rates again this year, with a December change put at less than a 50 percent probability in the futures market.
Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said "the primary reason U.S. yields are creeping up is that thinking about it clearly, the market has decided that the Fed is unlikely to change the December 2017 dot - still saying they expect one more rate hike in 2017."
Benchmark 10-year Treasury notes were last down 8/32 in price to yield 2.229 percent. The yield fell to 2.016 percent on Sept. 8, the lowest since Nov. 10, 2016.
The dollar was up 0.5 percent against the Japanese currency at 111.38 yen.
The Bank of Japan is widely expected to maintain its massive asset-buying campaign at a meeting on Thursday.
Political uncertainty may have a part to play in the BOJ's thinking. Sources told Reuters on Sunday that Japanese Prime Minister Shinzo Abe was considering calling a snap election for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party.
Canada has already raised interest rates twice in recent months, while the Bank of England shocked many last week by flagging its own coming increases. The European Central Bank, meanwhile, is expected to shed more light on plans to exit its extraordinary stimulus next month.
In the U.S. stock market, the Dow Jones Industrial Average rose 63.01 points, or 0.28 percent, to 22,331.35, the S&P 500 gained 3.64 points, or 0.15 percent, to 2,503.87 and the Nasdaq Composite added 6.17 points, or 0.1 percent, to 6,454.64.
On Friday, the benchmark S&P 500 index closed at a record high, hitting the 2,500 level for the first time.
"You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to (Fed chief) Janet" (Yellen), said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
Shares of Amazon.com were down 1.3 percent. Amazon Web Services said it will start charging its customers by the second for use of its popular EC2 virtual slices of servers in its data centers, according to a CNBC report. Shares of Google also were down 0.6 percent.
"That competes with Google and Microsoft, and it's going to weigh on the entire tech space," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
The pan-European FTSEurofirst 300 index was up 0.3 percent. MSCI's index of world stocks was last up 0.2 percent and hit an intraday record high of 487.07.
Talk of monetary tightening and a bounce in the dollar put gold on the defensive. Spot gold was down 1.04 pct at $1,305.46/oz.
U.S. crude oil prices slipped below $50 per barrel but stayed close to multi-month highs as refineries in Texas continued to restart after Hurricane Harvey.
U.S. crude futures rose 2 cents to settle at $49.91, while Brent crude futures fell 14 cents to $55.48.
For Reuters 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
Additional reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak in New York, John Geddie in London, Sruthi Shankar in Bengaluru and Wayne Cole in Sydney; Editing by Jeremy Gaunt and Dan Grebler