** Focus on inflation and interest rate concerns
** Wall Street likely open firmer, Europe flat
** Bonds flat to lower, dollar retreats after bounce
By Jeremy Gaunt, European Investment Correspondent
LONDON, June 11 (Reuters) - A conviction that central banks
will take steps to fight the threat of global inflation weighed
on markets again on Wednesday, keeping bonds and the dollar
relatively steady while stocks were mixed.
Wall Street looked set to open higher.
Comments from Federal Reserve Chairman Ben Bernanke on
Tuesday that the Fed would "strongly resist" a rise in public
perceptions of inflation continued to reverberate.
It was the strongest language yet used by Bernanke to warn
markets the Fed will not be complacent as declines in the dollar
helped to spur crude's 40 percent climb so far this year.
The comment followed similar hawkishness from European
Central Bank President Jean-Claude Trichet last week and a
surprise "hold" on interest rates from the Bank of Canada on
Tuesday.
Underlining the general concern about prices, Spain said on
Wednesday that year-on-year inflation was 4.6 percent in May,
its highest rate in nearly 13 years.
"We should take what Bernanke said at face value. He said
the downside risks to growth have diminished and now they are
more focused on inflation risk," said John Ip, senior economist
at Morley Fund Management.
Government bonds suffered early from the new mood, with euro
zone government bond futures hitting a new 11-month low on
Wednesday and short-dated yields rising.
The dollar also felt the impact, striking a 3-1/2-month high
against the yen.
"Fed hawkishness has triggered a rebound in the dollar and
Bernanke's comments that the U.S. economy is not faring as badly
as was thought have improved risk appetite which is supporting
the yen," said Adam Myers, markets strategist at Credit Suisse.
The dollar was later at 107.24 yen <JPY=>, down a bit on the
day, while the euro was up at $1.5514 <EUR=>. ECB interest rates
are higher that the Fed's.
STOCKS
European stocks tried to rally after recent weakness and the
FTSEurofirst 300 <> opened higher. It was later flat.
Investors were sceptical that it would last.
"We don't believe that this (rally) is going to hold water,"
Franz Wenzel, a Paris-based strategist at AXA Investment
Managers, said of the early gains.
"It's not really the environment where you want to be
brave."
Earlier, Japan's Nikkei stock average rose 1.2 percent,
boosted by exporters on a softer yen.
The benchmark average <> added 162.31 points to end at
14,183.48, snapping a two-day losing streak and breaking above
the key 25-day moving average.
The broader Topix <> rose 0.5 percent to 1,390.03.
