* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
* Fed's Powell, Bullard temper July rate cut expectations
* European stocks fall for fourth straight session
* Gold slips more than 1%
By Virginia Furness
LONDON, June 26 (Reuters) - Global stocks fell while the dollar rose on Wednesday as comments from U.S. Federal Reserve dampened excitement about an aggressive rate cut as early as July from the world's most important central bank.
Fed Chairman Jerome Powell and St. Louis Federal Reserve Bank President James Bullard on Tuesday pushed back on market expectations and presidential pressure for a significant U.S. interest rate cut of half a percentage point as soon as its next meeting.
Powell said the central bank is "insulated from short-term political pressures". But he said he and his colleagues are currently grappling with whether uncertainties around U.S. tariffs, Washington's conflict with trading partners and tame inflation require a rate cut.
The pan-European STOXX 600 index fell 0.3% to its lowest level in a week, while Germany's Dax was down 0.15%.
The MSCI world equity index, which tracks shares in 47 countries, was down 0.16%, while U.S. futures indicated a flat to lower open.
The dollar rebounded and gold prices retreated after Powell's comments which pulled the dollar up from three-month lows against a basket of other currencies in the previous session at 95.843. It was up 0.1% at 96.273.
Equity markets have rallied this month in anticipation that Fed policymakers would cut rates, but Powell's remarks cast doubt on those expectations when he referred to the Fed's independence.
According to latest data from CME Group's FedWatch program, federal funds futures implied that traders now see a 27% chance of the Fed lowering rates by half a percentage point in July, compared to 42% on Monday.
However, not all see the comments as evidence of a policy u-turn. Richard Dias, multi asset strategist at Pictet Asset Management, said the Fed had effectively backed itself into a corner, making a cut in July or September highly likely.
"They are in a weird dichotomy, so many cuts are priced in and the market has rallied on this news and the bond market has rallied so if they don't deliver what they have telegraphed, their credibility will be impinged," he said, adding that he expected a cut of 25 basis points.
"They would never do 50 bps, we are not in a recession," he said.
A modest sell-off in U.S. Treasuries, which often sets the tone for other major bond markets, failed to have much of a spill over into the euro zone. Ten-year Treasuries fell to 1.98% on Tuesday, before rising to above 2% on Wednesday.
European bond yields remained pinned to all-time lows, unmoved by the apparent shift in tone from the Fed. Germany's 10-year benchmark bond yield held around -0.32%.
And with the seemingly insatiable bid for bonds continuing, Austria opened books on a 100-year bond, a tap of its existing September 2117.
Market hopes are also pinned on progress in an ongoing trade dispute between the United States and China.
The U.S. hopes to re-launch trade talks with Beijing after Trump and his Chinese counterpart Xi Jinping meet in Japan during the G20 summit on Saturday but Washington will not accept any conditions on tariffs, a senior administration official said on Tuesday.
Pictet's Dias said he did not expect an immediate resolution.
"Everyone is desperate for a deal, but why would they do it then? It is a lot more than just trade, trade is a red herring, what matters is technology and I don't know how we are going to agree on this," he said. "What incentive does Donald Trump have to do a deal now anyway, it is better to drag it out until before the election and show a big win."
Gold pulled back from the almost six-year highs hit on Tuesday amid escalating tensions between the U.S. and Iran, slipping more than 1% on Wednesday.
The New Zealand dollar edged higher after the Reserve Bank of New Zealand (RBNZ) stood pat on monetary policy, keeping rates at a record low 1.50%. But the kiwi's gains were limited as the central bank expressed concern towards economic risks at home and abroad.
"Overall, today's announcement provides a strengthened signal that another cut is coming, most likely soon, unless there is a marked improvement in the global outlook," wrote economists at HSBC.
The kiwi last traded 0.2% higher at $0.6651.
U.S. crude oil futures advanced roughly 2% to touch a four-week high of $59.10 per barrel after data showed a decline in U.S. crude stocks. (Reporting by Virginia Furness, editing by Deepa Babington)