* U.S. Treasury yields hit seven-month highs
* Dollar rises on rate implications
* World stocks fall, led by Europe
* Wall Street set for losses
By Jeremy Gaunt, European Investment Correspondent
LONDON, June 8 (Reuters) - World stocks fell on Monday as yields on 10-year U.S. Treasuries hit a seven-month high, raising speculation the Federal Reserve may have to tighten interest rates sooner than anticipated.
The dollar rose on the same speculation. Wall Street looked set for a negative start.
World stocks as measured by MSCI were down 1 percent, but only after having closed with gains last week for the 12th week out of the past 13.
The FTSEurofirst 300 down 1.2 percent. Emerging market shares as measured by MSCI lost 1.8 percent
"The market has had a tremendous run so it is not surprising money is being taken off the table," said David Buik, partner at BGC Partners.
Japanese stocks rose to fresh eight-month highs, however, in a catch-up from Friday's better-than-expected U.S. jobs data.
The jobs data helped push two- and 10-year U.S. Treasury yields to seven-month highs in Asia before easing back.
The two-year yield rose 34 basis points on Friday, its biggest single-day jump since September. Benchmark 10-year yields had their largest weekly increase in about six years.
The 10-year yield was up flat to slightly higher at 3.8459 percent later on Monday.
Investors may be facing increased volatility this week, in part because government yields have been rising.
"The market is trying to get some visibility on the 2010 economic outlook. At the moment there is relatively little visibility on that. We are going to see strong contributions to growth through inventories in the next two months," said Darren Winder, equity strategist at Cazenove.
"Beyond that investors are looking to get some indications about what's happening to the underlying level of demand. At the moment there is very little information about that."
STRONGER DOLLAR
The dollar rose against a basket of currencies, extending sharp gains made late last week as the U.S. Treasury yields rose.
"The market is weighing how much more U.S. yields will rise and how they will impact the U.S. stocks and the economy," said a senior trader at a Japanese bank.
The dollar index, a gauge of the greenback's value against a basket of six major currencies, rose 0.8 percent. It gained 1.5 percent on Friday.
Sterling fell against the dollar, hitting its weakest in nearly two weeks just above $1.58, after European election results showed dwindling support for the UK's ruling Labour Party, increasing the chance that Prime Minister Gordon Brown may face another leadership challenge. It was later at $1.59.
Standard & Poor's downgrade of Ireland to AA from AA+ also weakened the euro.
Ten-year euro zone government bond yields were down 2 basis points at 3.699 percent. (Additional reporting by Dominic Lau and Joanne Frearson) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Hub click on http://blogs.reuters.com/hedgehub)