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* Europe stocks dip as investors lock in gains
* Wall Street expected to open lower
* Oil rises on drop in U.S. inventories
* Dollar firms after above-forecast U.S. PPI data
* World FX rates in 2017 tmsnrt.rs/2egbfVh
By Vikram Subhedar and Nigel Stephenson
LONDON, May 11 (Reuters) - Stocks fell in Europe as investors locked in gains on this year's strong run, while oil prices rose after U.S. fuel inventories declined and Saudi Arabia cut supplies of crude to Asia by more than expected.
U.S. stock futures indicated Wall Street would open marginally lower
MSCI's gauge of global stock markets dipped but was down less than 0.1 percent, having gained nearly 10 percent in 2017.
The pan-European STOXX 600 index fell 0.5 percent, led lower by financials. Asia-Pacific shares outside Japan, as measured by MSCI rose 0.4 percent and Japan's Nikkei rose 0.3 percent on Thursday.
Government bond yields rose as higher oil prices reinforced expectations inflation would pick up.
Signs prices could rise might encourage the European Central Bank to step back from its ultra-loose monetary policy in coming months.
Bank of England policymakers, concluding a two-day meeting, projected a very different outlook for the UK. They kept rates unchanged and indicated in a quarterly inflation report that interest rates were unlikely to rise until late 2019.
Policymakers voted 7-1 to keep rates on hold and Jake Trask, corporate dealer at OFX, said that if another had voted for a hike "then we could have seen sterling/dollar finally crack 1.30 after falling short a couple of times over the past week."
Sterling fell more than half a percent to a one-week low around $1.2860.
Brent crude oil rose another 1.2 percent following a 3 percent gain in the previous session. The advance helped Brent regain the $50 level and reverse all of last week's losses.
"We saw the biggest draw in (U.S.) inventories for the year last week with stockpiles down more than 5 million barrels, and it looks like OPEC's production cut is finally biting," said Greg McKenna, chief market strategist at brokerage AxiTrader.
The Organization of the Petroleum Exporting Countries and other producers, including Russia, have agreed to cut output by almost 1.8 million barrels per day during the first half of the year to try to reduce a global fuel glut.
Saudi Aramco will cut supplies to Asian customers by about 7 million barrels in June, sources have said.
In foreign exchange markets, the dollar rose 0.2 percent against a basket of major currencies after forecast-beating U.S. producer prices reinforced already very strong expectations for a June rise in Federal Reserve interest rates.
The euro fell 0.2 percent to $1.0850 and the Japanese yen gained 0.2 percent to 114.01 per dollar.
Earlier, the New Zealand dollar sank as much as 1.5 percent after the country's central bank stuck with a neutral bias, warning markets they were reading the outlook wrongly and expressing approval of the currency's declines this year.
The Canadian dollar, normally a big gainer when oil prices rise, fell after Moody's downgraded the credit ratings of six Canadian banks.
"The positive impact from Wednesday's recovery in commodities has faded into Thursday, with central bank risk and rating agency downgrades casting a darker shadow," said Joel Kruger, a strategist with currencies exchange LMAX.
Higher oil prices reinforced expectations that the ECB could pull back from its ultra-loose monetary policy and drove yields on euro zone government bonds higher.
German 10-year yields rose 1.7 basis points to 0.43 percent, having earlier hit a seven-week high of 0.46 percent.
"We are in an environment for an upward rise in bond yields," said Patrick Jacq, Europe rate strategist at BNP Paribas. "Part of that is coming from a risk-on mode after French elections and also a reassessment of ECB monetary policy expectations." (Additional reporting by Christopher Johnson, Patrick Graham, Dhara Ranasinghe nd Ritvik Carvalho in LONDON, editing by Larry King)