CORRECTED - GLOBAL MARKETS-Dollar rallies, stocks slip

* US inflation surprise props dollar, weighs on bonds

* Oil rises nearly 2 percent after 9 declining sessions

* Wall St adds to losses on poor GE outlook (Corrects to remove erroneous reference to GE's 2010 revenues being down 5 percent to 10 percent in paragraph 8)

By Walter Brandimarte

NEW YORK, Dec 15 (Reuters) - Higher-than-expected November U.S. inflation fueled demand for the dollar on Tuesday. but weighed on stocks and bonds as investors feared the Federal Reserve may need to raise rates faster than anticipated.

Oil futures prices rose almost 2 percent to settle above $70 a barrel following nine sessions of losses, offering some support to energy stocks. But Wall Street extended losses in late afternoon after bellwether General Electric Co issued a flat outlook for 2010.

Fears that the Fed could end its two-day meeting on Wednesday with a more hawkish view on interest rates surfaced after data showed the U.S. Producer Price Index jumped a surprising 1.8 percent last month, much more than the 0.8 percent forecast by economists. For more, see [ID:nN15217719].

"Everyone's on inflation watch," said Burt White, chief investment officer with LPL Financial in Boston.

"Indeed, inflation is starting to creep in, and that's going to build expectations the Fed will come in sooner, to slow the economic recovery down faster than what this market wants."

For a graphic on U.S. PPI, see http://graphics.thomsonreuters.com/129/US_PRODP1209.gif

Stocks slipped globally, with the MSCI all-country world stock index <.MIWD00000PUS> down 0.6 percent.

The Dow Jones industrial average <.DJI> slid 49.05 points, or 0.47 percent, to close at 10,452.00, while the Standard & Poor's 500 Index <.SPX> declined 6.18 points, or 0.55 percent, to finish at 1,107.93. The Nasdaq Composite Index <.IXIC> fell 11.05 points, or 0.50 percent, to end at 2,201.05.

GE shares slid 1.3 percent to $15.75 after the company, considered an indicator of the U.S. economy's health, said its industrial and capital finance profits will likely be flat next year.

In Europe, however, the FTSEurofirst 300 <.FTEU3> index of leading shares edged up 0.02 percent, holding the gains recorded in the previous three sessions.

In recent weeks, the relationship among stocks and the dollar, oil and gold has broken down, with those asset classes trading more independently of one another than they normally do.

For a graphic on those assets in 2009, see http://graphics.thomsonreuters.com/129/US_DGSPB1209.gif

DOLLAR RALLIES

The U.S. dollar rallied to a 2-1/2-month high against the euro on speculation of higher U.S. interest rates, but also because the European single currency was hurt by fiscal concerns in the euro zone following the downgrade of Greece's credit rating last week.

Adding to those concerns was news that Austrian monetary authorities had put the country's fourth-largest bank, Oesterreichische Volksbanken , on a watch list. [ID:nSGE5BE09B]

"Problems in Greece continue, and the news about the Austrian bank hasn't helped, either," said Ian Stannard, currency strategist at BNP Paribas in London.

The euro weakened 0.83 percent to $1.4533. Against the Japanese yen, the dollar gained 1.2 percent to 89.62. The greenback was also stronger against a basket of major trading-partner currencies, with the U.S. dollar index <.DXY> rising 0.76 percent.

Inflation anxiety drove prices of U.S. Treasuries lower.

The 30-year bond , the longest Treasury maturity, last traded down 25/32, with the yield at a four-month high of 4.5321 percent.

The benchmark 10-year U.S. Treasury note fell 12/32 in price, with the yield at 3.5975 percent, its highest level since August.

U.S. crude oil rose 1.7 percent, or $1.18, to settle at $70.69 per barrel, ahead of weekly inventory reports expected to show crude stockpiles fell last week.

Analysts also said oil was oversold after a nine-day streak of losses. (Additional reporting by Richard Leong, Steven C. Johnson and Robert Gibbons; Editing by Jan Paschal)