GLOBAL MARKETS-Strong dollar odds stir commodity boom faith

                                
 By Jeremy Gaunt, European Investment Correspondent
                                
 LONDON, June 4 (Reuters) - Prospects for a stronger dollar
prompted visions of a cooling of the commodity boom on
Wednesday, sending equities in Europe lower but boosting Tokyo
stocks sharply.
                                
 Oil played along with the mood, falling below $124 a barrel,
more than 8 percent below its peak two weeks ago.
                                
 The catalyst for many market moves remained Federal Reserve
Chairman Ben Bernanke's unusually explicit warning on Tuesday
about the inflationary threat from a weak U.S. currency.
                                
 It was widely taken as a signal that the Fed was done with
its rate-cutting cycle and boosted the dollar, which is now up
more than 2 percent in a week against a basket of currencies
<.DXY>.
                                
 In Europe, where many share indexes are linked to
commodities through mining and oil companies, stocks took a hit.
The pan-European FTSEurofirst 300 <.FTEU3> was down 1.75
percent.
                                
 There were also deep concerns about the state of the
financial sector focused on the possibility that Lehman Brothers
<LEH.N> may need to raise more capital.
                                
 "The dollar actually rules the roost today," said Howard
Wheeldon, a senior strategist at BGC Partners. "We are reminded
that the dollar isn't just about oil, it has a significant
affect on all commodities.
                                
 "The theme out there is very, very depressing. Good news is
in very short supply (and) we've got to sit this one out for
some while yet."
                                
 The story was different in Japan, however, where stocks
jumped, led by exporters that would benefit from a weaker yen.
Japan is also highly dependent on imported oil.
                                
 "Oil is settled and the dollar is strong, and the impact of
that is significant," said Hiroaki Osakabe, a fund manager at
Chibagin Asset Management.
                                
  The benchmark Nikkei <.N225> gained 1.6 percent, or 226.40
points, to 14,435.57 and the broader Topix <.TOPX> rose 1.6
percent to 1,430.47.
                                
 
                                
 BERNANKE BOUNCE
                                
 The dollar held firm against a basket of six major
currencies, keeping hefty gains made the day before on
Bernanke's comments.
                                
 The dollar/major currency index was up 0.1 percent on the
day at 73.404, while the euro held steady at $1.5440 <EUR=>
after sliding 1.4 percent from Tuesday's peak. 
                                
 The euro has now retreated more than 3.5 percent from record
highs of $1.6018 hit in April, according to Reuters data.
                                
 The dollar edged down against a broadly stronger yen to
104.89 yen <JPY=>, while the euro fell 0.2 percent to 161.90
<EURJPY=>.
                                
 Two-year euro zone government bond yields <EU2YT=RR> were 7
basis points lower at 4.308 percent, while 10-year yields
<EU10YT=RR> were down 4 basis points at 4.398 percent.
 (Additional reporting by Michael Taylor; Editing by Catherine
Evans)