GLOBAL MARKETS-U.S. rate views boost dollar; hit stocks, gold

* MSCI world equity index down 0.5 pct at 297.81

* US rate expectations weigh on stocks, buoy dollar

* Gold, oil extend losses; bonds firmer

By Natsuko Waki

LONDON, Dec 7 (Reuters) - World stocks fell on Monday from last week's 14-month high while the dollar hit a five-week peak as investors grew convinced U.S. interest rates could rise soon after the previous session's robust jobs report.

A strong U.S. currency weighed on dollar-priced commodity prices, with gold extending Friday's sharp losses having hit an all-time high last week.

The dollar raced higher against a basket of major currencies, having posted its biggest one-day gain this year on Friday, after data showed on Friday that U.S. employers cut only 11,000 jobs last month, the smallest decline since December 2007.

Following the jobs data, investors are fully pricing in a chance that the Fed might raise interest rates to 50 basis points in August .

"The market is pricing in more concrete evidence that the Fed will start normalising policy," said Geoffrey Yu, currency strategist at UBS.

"While the Fed is not in a position to start being hawkish on policy, it may start being less dovish."

MSCI world equity index <.MIWD00000PUS> fell 0.6 percent. U.S. stock futures were down around 0.4 percent , pointing to a weaker open on Wall Street.

The FTSEurofirst 300 index <.FTEU3> lost more than 1 percent. German engineering firm Siemens fell nearly 2 percent after Morgan Stanley downgraded the stock "equal-weight" from "overweight" and cut its price target.

Banks also came under pressure on concerns Britain was still considering some kind of windfall tax on bankers' bonuses.

A UK government source told Reuters on Friday that a tax on banks was one revenue-raising option being considered by finance minister Alistair Darling for his pre-budget report on Wednesday and weekend newspapers were heavy with speculation on what form this could take.

Emerging stocks <.MSCIEF> fell 0.8 percent. Dubai stocks <.DFMGI> fell 5.8 percent to a 20-week low after the emirate's government said it would not sell any assets to meet the multi-billion dollar obligations of state-owned Dubai World.

Dubai shocked investors late last month by asking a standstill on debt held by its conglomerate Dubai World, triggering some sell-off in world stocks and other risky assets.

U.S. crude oil fell more than 1 percent to $74.66 a barrel. Gold fell more than 2 percent to $1,136 an ounce.

The dollar <.DXY> rose 0.2 percent against a basket of major currencies, while it rose 0.6 percent to a five-week high of $1.4761 per euro . 10-year U.S. Treasury yields were steady in Europe after hitting a three-week high of 3.512 percent on Friday.

"The rally in dollar crosses and spike in yields are a taster of what 2010 may look like if the US economy starts showing more tangible evidence that economic conditions are normalising," Lloyds TSB Corporate Markets said in a note to clients.

The bund futures rose 33 ticks after Friday's sell-off following Friday's better-than-expected U.S. jobs data.

The euro zone 2/10-year government bond yield curve flattened to around 182 basis points, marking its flattest level since early October.

The yield on the short end of the curve rose sharply following the jobs data and the European Central Bank's plans announced last week to withdraw extraordinary monetary support. (Additional reporting by Naomi Tajitsu; Editing by Ron Askew)