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By Vikram Subhedar
LONDON, Oct 27 (Reuters) - Reassuring results from some ofEurope's biggest banks gave financials a boost on Thursday andhelped offset weakness in oil-related stocks, while higher bondyields underpinned the dollar.
As corporate earnings continued to dominate headlines,growing expectations that the U.S. Federal Reserve will raiseinterest rates by the end of the year have kept gains in riskyassets in check.
Markets are now pricing in a 74-percent chance that the U.S.Federal Reserve will raise interest rates at its Decembermeeting, according to CME Group's FedWatch tool, following aseries of hawkish comments from Fed policymakers.
Bets that the Fed will hike rates have driven the dollar tonine-month highs against a basket of currencies this weekand have supported U.S. 10-year Treasury yields.
The "steepening of the US yield curve works as a magnet forcapital coming at this point in particular out of low yieldingenvironments such as Japan and Switzerland," said analysts atMorgan Stanley, adding that these flows will continue to supportthe dollar.
The dollar index was up 0.1 percent at 98.716, just off itsrecent highs.
An overnight slide in oil prices and underwhelming resultsfrom Apple soured the mood in Asian stocks wheretechnology sectors led losses in Japan.
Europe's STOXX 600 was up 0.3 percent, however,though defensive sectors such as healthcare and utilitiesprovided the biggest boost to the index, reflecting investorcaution.
Banks, among the worst performing sectors in Europethis year, rose 0.5 percent helped by a surprise third-quarterprofit at Deutsche Bank and forecast-beating numbersfrom Barclays which, like its U.S. rivals, enjoyed asignificant pick-up in bond trading revenue.
Data from the European Central Bank showing lending growthto euro zone companies and households grew at a steady pace lastmonth was also seen helping the sector.
The euro was little changed against the dollar whilesterling rose after data showed Britain's economybarely slowed in the third quarter despite the Brexit voteshock.
UK ten-year government bond yields rose to a10-day high of 1.2 percent as the strong data further diminishedthe chance of a fresh interest rate cut by the Bank of Englandnext week.
In commodity markets, crude oil futures rebounded fromearlier losses as traders remained cautious that OPEC would beable to cut production come late November.
U.S. crude edged up 0.4 percent to $49.38 a barrel,while Brent crude added 0.7 percent to $50.33.
Spot gold XAU= rose 0.2 percent to $1,269.38 an ounce. (Reporting by Vikram Subhedar; Editing by Raissa Kasolowsky)
