(Adds U.S. open, updates prices)
By Vikram Subhedar
LONDON, Oct 27 (Reuters) - Reassuring results from some ofEurope's biggest banks gave the region's beaten-down financialsa boost on Thursday and helped offset weakness in industrial andtech stocks, while higher bond yields continued to underpin thedollar.
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.
Stocks futures on Wall Street were up 0.3 percent.
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 10-year U.S. Treasury yields.
The "steepening of the U.S. yield curve works as a magnetfor capital coming at this point in particular out of lowyielding environments such as Japan and Switzerland," saidMorgan Stanley analysts, adding that these flows would continueto support the dollar.
The dollar index was little changed at 98.538, just offrecent 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 off 0.1 percent, withdefensive sectors such as healthcare and utilities providing thebiggest boost to the index, underscoring investor caution.
Banks, among the worst performing sectors in Europethis year, rose 0.4 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 which has come underheavy pressure this year over concerns about regulatory costsand eroding profitability.
The UK economy barely slowed in the third quarter despitethe Brexit vote, with much stronger growth than expected,prompting a further selloff in bonds and spike in yields.
UK 10-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.
At a time when the market is worried that central banks arestepping back from the ultra-accommodative stance of recentyears, a reduced chance of a rate cut was enough to pushbenchmark bonds in Europe and U.S. to their highest level sincethe Brexit vote in late June.
In commodity markets, crude oil futures rebounded fromearlier losses as a further drop in U.S. crude inventoriescountered investor doubts that OPEC will be able to implement aproduction cut.
U.S. crude edged up 0.2 percent to $49.28 a barrel,while Brent crude added 0.5 percent to $50.22.
Spot gold XAU= rose 0.2 percent to $1,269.38 an ounce. (Editing by Robin Pomeroy)
Barclays (BARC)
