Stocks dip but Wall St gains; U.S., euro zone bonds rise

By Rodrigo Campos

NEW YORK (Reuters) - Stocks in major markets fell on Monday as investors bet the Federal Reserve will raise interest rates sooner than previously expected, while U.S. and euro zone bond prices rose as the European Central Bank started its bond-buying programme.

European shares were down, tracking moves in Asia following forecast-beating U.S. jobs data that last week stoked expectations the Fed would bring closer the timing of a rate hike. Wage inflation pressures, however, were muted.

Deal news and share buybacks helped Wall Street open higher after two weeks of losses, with the S&P 500 about 2 percent below its record high set last week.

The Dow Jones industrial average rose 105.55 points, or 0.59 percent, to 17,962.33; the S&P 500 gained 6.48 points, or 0.31 percent, to 2,077.74 and the Nasdaq Composite added 1.42 points, or 0.03 percent, to 4,928.79.

A larger pullback is still likely on Wall Street according to a Monday note from Brian Reynolds, chief market strategist at Rosenblatt Securities in New York.

"Given the intensity of the selling (last week) we now think it is more likely that it bottoms out in the 2,000-2,050 area," Reynolds wrote about the S&P 500's near-term outlook.

The pan-European FTSEurofirst 300 index was last down 0.4 percent and Tokyo's Nikkei <.N225> closed 0.95 percent lower. An MSCI gauge of stocks in major markets fell 0.2 percent.

The ECB said it and the euro zone's national central banks had begun buying government bonds under its quantitative easing programme, which is aimed at igniting inflation and growth and will last until at least September 2016.

German 10-year yields , the euro zone benchmark, fell 9 basis points to 0.31 percent. Greek yields, however, rose before a meeting of euro zone finance ministers to discuss reforms proposed by Greece, which is seeking more funds from its international creditors.

The U.S. benchmark 10-year Treasury note rose 11/32 in price to yield 2.1987 percent. The 30-year bond rose 25/32, its yield at 2.7996 percent.

The U.S. dollar was flat against a basket of currencies after hitting an 11-1/2-year high.

The euro hit its lowest against the U.S. currency since September 2003 at $1.0821 before edging up to $1.0861. The euro has been pressured by the divergent monetary policies of the Fed and the ECB.

"The dollar has travelled a long way in a pretty short time. U.S. yields have risen but they need another catalyst to move further higher. So until then, we could see some consolidation," said Jeremy Stretch, head of currency strategy at CIBC World Markets, London.

Brent crude oil rose 16 cents to $59.89 a barrel while U.S crude rallied 2 percent to $50.58 a barrel. Gold edged higher to $1,168.75 an ounce, just above a three-month low.

(Additional reporting by Ahmed Aboulenein in London; Editing by Meredith Mazzilli)