* Dollar rises 0.4 percent vs currency index; bond yields rise
* US stock futures up to 0.9 percent higher; world stocks gain
* UK bond yields rise as May heads for crunch Brexit talks
By Sujata Rao
LONDON, Dec 4 (Reuters) - The dollar jumped on Monday versus the currencies of other developed and emerging nations while Treasury yields rose and Wall Street was primed for a another record-setting day after the U.S. Senates voted to approve a wide-ranging tax overhaul.
European stocks opened higher, with French, German and British markets up 0.9 to 1.4 percent, anticipating a strong New York session - futures for the Dow Jones, S&P 500 and Nasdaq indexes rallied as much as 0.9 percent .
Markets are reacting to the Senate’s approval on Saturday for the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing taxes for businesses.
“With this tax deal, markets could pick up speed into the end of the year. It looks like the ingredients for a year-end rally are there,” said Angelo Meda, head of equities at asset manager Banor SIM in Milan, predicting equity gains of 3 to 4 percent.
Tax cut hopes have been a significant tailwind this year for U.S. stocks, although the move is expected to add to the country’s $20 trillion national debt and increase the chances of more aggressive near-term rate rises in the world’s largest economy.
Those expectations pushed the dollar up as much as 0.4 percent against a basket of currencies, while Treasury yields rose across the curve.
Two-year yields matched Friday’s nine-year high , indicating that bonds are already anticipating the debt increase.
“This environment should question whether the market is being too conservative in only pricing 50 basis points of (U.S. Federal Reserve) tightening next year,” analysts at ING Bank told clients.
“Loose fiscal and tight monetary policy should be sending the dollar firmer.”
For the time being, the dollar gave up some early gains against the euro and sterling, which traded around 0.3 percent lower to the dollar . Many warn of risks ahead, especially a U.S. government shutdown, should this Friday’s deadline to authorise new borrowing pass without a deal.
World stocks rose just 0.18 percent, though they stayed off recent record highs, following a shaky start in Asia caused by early selling in technology shares.
While Japanese shares closed half a percent lower most other Asian markets managed to end in the black . Emerging equities rose 0.5 percent.
In Europe, German bond prices tracked Treasuries lower, with 10-year Bund yields up around four basis points and rising off almost three-month lows hit Friday.
But the focus was on Britain, with 10-year UK government bond yields up around 6 basis points as Prime Minister Theresa May headed for a crunch meeting with European Union officials to break a deadlock in Brexit talks.
EU officials have expressed optimism a deal on the main issues will be struck on Monday, even though members of May’s party have urged her to walk away unless there is progress .
Hopes of a deal pushed sterling recently to six-month highs against its trading partners’ currencies, but it slipped on Monday against the firmer dollar and was flat to the euro, giving up tentative early gains.
Shares in British mid-sized firms were up 0.7 percent FTMC>.
“If a green light is provided today for talks to move on to future relations, including a timely transition arrangement, it would open the door for further pound gains in the near-term,” MUFG analysts wrote, warning that the reverse was likely, should talks break down.
Emerging currencies were mostly weaker against the dollar, with Turkish markets hit by data showing inflation at almost 13 percent, the highest since 2003.
On commodities, Brent crude futures slipped 0.7 percent, pressured by signs of increasing supply from U.S. shale producers. Copper prices firmed, after data last week showed China’s economy in good shape.
Reporting by Sujata Rao, additional reporting by Swati Pandey in Sydney and; Helen Reid and Saikat Chatterjee in London