* European stock market mostly flat, US futures dip
* Some caution before Fed's Yellen testimony on policy
* China inflation picks up
* Dollar pressured after Trump's national security aide
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
(Updates prices, adds UK data)
By Dhara Ranasinghe
LONDON, Feb 14 Stocks flatlined and the dollar
dipped on Tuesday as caution set in before testimony from
Federal Reserve chief Janet Yellen that may offer clues to the
timing of the next U.S. interest rate rise.
Adding to pressure on the dollar was the resignation of
President Donald Trump's national security adviser Michael
Flynn, who quit over revelations he had discussed U.S. sanctions
against Moscow with the Russian ambassador to the United States
before Trump took office, and misled Vice President Mike Pence
about the conversations.
The prospect of Trump-led economic stimulus in the United
States has underpinned the dollar and stocks in recent days,
powering U.S. equity markets to record highs on Monday and
helping Asian shares to hit 19-month peaks on Tuesday.
But the buoyant mood in global markets was tempered somewhat
as attention turned to semi-annual testimony by Yellen on
Tuesday and Wednesday that could highlight the likelihood of two
or more U.S. interest rate hikes this year.
Dallas Fed President Robert Kaplan on Monday argued that the
Fed should move soon to avoid falling behind the curve,
especially as fiscal policy could drive faster growth and
"If Yellen wants March to be a live meeting as other Fed
officials have suggested it is, she will have to adopt a more
hawkish tone beyond the usual reference to data dependency,"
said ING senior rates strategist Martin van Vliet.
"Currently we calculate a market implied probability of
around 17 percent for a March rate hike."
The STOXX 600, Europe's leading index of top 600
shares, dipped 0.1 percent to 369.73 points, off more than
one-year highs hit on Monday.
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan edged up 0.2 percent, trying for
its fifth straight session of gains.
Japanese shares ran into trouble after Toshiba Corp
delayed an anxiously awaited earnings release.
After a day of delay and confusion, Toshiba said it would
take a $6.3 billion hit to its U.S. nuclear unit, a writedown
that wipes out its shareholder equity and leaves the loss-making
group scrambling for capital.
There was some eye-catching data from China, where producer
price inflation picked up more than expected in January to near
six-year highs, while consumer price inflation neared a
DOLLAR, STERLING ON BACK FOOT
Adding to signs of a pick-up in inflation globally, other
data on Tuesday showed British consumer prices rose last month
at the fastest pace sine June 2014.
U.S. stock market futures were just a touch lower..
U.S. stock indexes hit historic peaks on Monday, with the
benchmark S&P 500's market value topping $20 trillion as
investors bet tax cuts promised by Trump would boost the
The dollar stumbled against major currencies after Flynn's
resignation and as investors looked ahead to Yellen's testimony.
The dollar index dipped 0.2 percent against a basket
of currencies to 100.78, while the euro was 0.3 percent firmer
after three sessions of losses to stand at $1.0628.
Sterling was the biggest currency mover, falling 0.5 percent
against the dollar after the UK inflation numbers came in
lower than expected.
In commodity markets, metals were on a tear thanks to supply
disruptions and strong Chinese demand.
Aluminum touched its highest in 21 months on renewed
concerns about potential closures of Chinese smelters to cut
pollution, while copper also extended gains.
Oil recouped some ground on OPEC-led efforts to cut output,
though rising production elsewhere kept prices to a narrow range
that has contained them so far this year.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Wayne Cole in SYDNEY; Editing by Mark
Trevelyan and Gareth Jones)