Shares fall, yields rise as Fed, Scotland dominate

LONDON (Reuters) - Global shares fell on Wednesday as markets strengthened bets on an early U.S. rate hike while persistent concerns over Scotland's future unnerved investors in Europe, helping a high-flying dollar hold on to recent gains.

European stocks fell for the fourth day in a row and benchmark U.S. Treasury yields rose for the fifth straight session, something not seen since early June.

Shares in the euro zone's biggest bank Santander fell 2 percent, twice as much as the euro zone financials index <.SX7E> and three times as much as the broader pan-European banking index <.SX7P> after the sudden death of its 79-year old chairman Emilio Botin.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan posted its largest fall in nearly six months.

In early trade the FTSEurofirst index of leading European shares was down 0.5 percent at 1379 points <.FTEU3>, Germany's DAX was down 0.7 percent <.GDAXI> and France's CAC 40 <.FCHI> and Britain's FTSE 100 <.FTSE> were both down 0.3 percent.

The stock market slide on Wednesday followed broad weakness on Wall Street the previous day after initial excitement over Apple Inc's new products evaporated, and as bond yields continued their march higher.

The 10-year U.S. yield scaled 2.5 percent, lifting European yields, as investors continued to digest a study earlier this week by the San Francisco Fed that showed investors expect slower rate hikes than policymakers themselves expect.

Germany's 10-year yield rose back above 1 percent to its highest in a month to trade at 1.02 percent , and Spain's benchmark yield rose 6 basis points to 2.27 percent .

"The study by the San Francisco Fed unnerved investors that markets are too complacent about the pace of Fed rate hikes," said Nick Stamenkovic, bond strategist at RIA Capital Markets.

"It is only a matter of time before the Fed moves for tighter policy."

SCOTTISH POLL JITTERS

The shift towards pricing in an earlier U.S. rate hike helped the dollar hold onto its recent gains.

The dollar hit a six-year high against the yen of 106.66 yen and the dollar index, a basket of its value against six major currencies, hovered near Tuesday's 14-month high <.DXY>.

The euro recovered from Tuesday's 14-month low of $1.2860 back to $1.2933, and sterling halted its recent decline sparked by the upcoming Scottish vote, ticking up a fifth of one percent to $1.6125 .

But with latest polls suggesting the outcome of the referendum is now too close to call, the "risk premium" surrounding the possibility the 300 year-old United Kingdom could cease to exist next week continues to hang over British financial assets.

"Exiting a political and monetary union which has existed over the past 300 years would not be without deep and long-lasting consequences. UK assets are facing a risk premium problem," SocGen analysts wrote in a note on Wednesday.

On Tuesday, Bank of England governor Mark Carney said Scotland could not be fully independent and have a currency union with the rest of the UK, warning that currency union is "incompatible with sovereignty".

Gold recovered from Tuesday's three-month low of $1,247.15 per ounce to stand at $1,255.19 .

(Reporting by Jamie McGeever, additional reporting by Marius Zaharia, editing by John Stonestreet)

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