Fed rate outlook weighs on stocks, lifts dollar

LONDON (Reuters) - European stocks slipped 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 an anti-austerity 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, said it would be "patient" and would take international developments into account in deciding when to raise borrowing costs. Some saw that as indicating any rate increase could be delayed.

U.S. shares, which closed lower on Wednesday after the Fed statement, with energy stocks weakening, were set to open modestly higher, according to stock index futures. .

German government bond yields fell, as did U.S. Treasuries, on this dovish view. U.S. 30-year bond yields reached a record low on Wednesday. Concern over Greece, whose new government opposes the terms of Greece's international bailout, also boosted demand for low-risk debt.

European shares, driven lower on Tuesday and Wednesday, after the Syriza party won Sunday's election in Greece, fell again. The pan-European FTSEurofirst 300 index <.FTEU3> was last down 0.5 percent.

"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."

The main Athens stock index <.ATG> was up 2.4 percent as bank shares, hammered earlier this week, bouncing off record lows. Greek 10-year bond yields , which had risen some 2 percentage points since the election, gave up some of those gains and were last down 21 basis points at 10.6 percent.

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.

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

Highlighting the problem, preliminary January inflation data from Germany showed consumer prices falling 0.5 percent, more than forecast.

The dollar index <.DXY>, which measures the greenback against a basket of currencies, was up 0.2 percent. The dollar was up 0.5 percent at 118.09 yen . The euro, however, gained 0.1 percent to $1.1294 .

"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 fell to its lowest since March 2011 after the central bank opened the door to a possible rate cut.

Brent crude oil held above $48 a barrel. U.S. oil futures were down 0.1 percent at $44.43. They had fallen to $44.08, the lowest in nearly six years, 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 $1,268.86 an ounce.

(Additonal reporting Blaise Robinson in Paris, Patrick Graham in London; Editing by Crispian Balmer, Larry King)

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