Fed outlook and Greece worries hit stocks, dollar up

LONDON (Reuters) - Stocks fell in Europe and Asia and the dollar strengthened on Thursday after the Federal Reserve took an upbeat view of the world's largest economy and signaled it was on track to raise interest rates this year.

The stronger dollar helped push U.S. oil prices to six-year lows and weighed on the price of gold.

Greece, where a radical leftist prime minister took over on Monday, also kept investors nervous, although Greek shares regained some ground after falling 9.2 percent on Wednesday.

The Fed, after a two-day policy meeting, also said it would be "patient" and would take international developments into account in deciding when to raise borrowing costs -- a reference some in the markets saw as meaning any hike could be delayed.

German government bond yields fell, following similar declines in U.S. Treasuries, on this dovish view. U.S. 30-year bond yields hit a record low on Wednesday.

Concerns over Greece, whose new government opposes the conditions attached to the country's international bailout, also boosted demand for low-risk debt, though Greek yields soared.

European shares, driven lower on Tuesday and Wednesday, after the left-wing party Syriza won Sunday's election in Greece, fell again. The pan-European FTSEurofirst 300 index <.FTEU3> was last down 0.7 percent at 1,464 points.

"The bullish tone by the Fed on the economy caught investors off-guard," said John Plassard, senior equity sales trader at Mirabaud Securities in Geneva.

"Meanwhile, investors are fretting about Greece again, and it could go on for a while. What happened yesterday with Athens's bourse losing 9 percent is spooking investors. That said, it's too early to draw conclusions about the new government."

The main Athens stock index <.ATG> was up 0.5 percent, with bank shares, hammered this week, bouncing off record lows. Greek 10-year bond yields hit 1 1/2-year highs above 11 percent, up more than 30 basis points on the day.

Shares were weak in Asia. Japan's Nikkei <.N225> fell 1.1 percent in its biggest one-day drop in two weeks. MSCI's main measure of Asia-Pacific shares, excluding Japan, <.MIAPJ0000PUS> fell 1.2 percent.

Wall Street fell on Wednesday, with the S&P 500 index <.SPX> losing 1.4 percent following the Fed statement and as lower oil prices pressured energy stocks <.SPNY>.

The Fed's monetary policy stance contrasts with those of other major central banks. The European Central Bank last week unveiled a bond-buying program to stimulate the economy.

The dollar index <.DXY>, which measures the greenback against a basket of currencies, was up 0.2 percent. The U.S. currency was up 0.3 percent at 117.87 yen . The euro was marginally lower at $1.1304 .

"By underlining 'international developments', the Fed is highlighting that process and the attraction of the U.S. as an investment destination. That all plays in to dollar strength," said Ian Stannard, head of European FX strategy with Morgan Stanley in London.

The New Zealand dollar hit its lowest since March 2011 after the central bank opened the door to a possible interest rate cut

Brent crude oil rose 0.25 percent to $48.60 a barrel. U.S. oil futures were down 0.1 percent at $44.40, having hit a near six-year low of $44.08 after data showed U.S. stockpiles rose by almost 9 million barrels last week.

Gold retreated after the Fed outlook lifted the dollar and was last at $1,279.80 an ounce.

(Additonal reporting Blaise Robinson in Paris, Patrick Graham in London, Lisa Twaronite and Hideyuki Sano in Tokyo; Editing by Crispian Balmer)

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