* U.S. Treasury yields at seven-month highs
* Dollar rises on rate implications
* World stocks fall, led by Europe
By Jeremy Gaunt, European Investment Correspondent
LONDON, June 8 (Reuters) - The 10-year U.S. Treasury yield hit a seven-month high on Monday ahead of fresh supply this week and because of speculation the Federal Reserve may have to raise interest rates sooner than anticipated.
The dollar rose on the same speculation. World stocks, meanwhile, fell having closed with gains last week for the 12th week out of the past 13.
European shares opened sharply lower, with the FTSEurofirst 300 down 1.6 percent. Emerging market shares as measured by MSCI lost 1.6 percent and overall global shares fell 1 percent.
"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."
Japanese stocks rose to fresh eight-month highs, however, in a catch-up from Friday's better-than-expected U.S. jobs data.
Investors may be facing increased volatility this week, in part because government yields have been rising.
Two- and 10-year U.S. Treasury yields hit seven-month highs in Asia on Monday as Treasuries extended losses after last week's jobs data stirred talk that the Federal Reserve may raise interest rates later this year.
The two-year yield rose 34 basis points on Friday, its biggest single-day jump since September, and contributed to the largest weekly increase in benchmark 10-year yields in about six years.
The 10-year yield was up 5 basis points at 3.8932 percent.
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 0.5 percent. It gained 1.6 percent.
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.
Ten-year euro zone government bond yields were flat. (Additional reporting by Dominic Lau; editing by Stephen Nisbet) (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)