*

Wall Street indexes open lower, ending holiday week on a

down

note

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U.S. dollar set for 7% annual gain, yen faces fourth year

of

losses

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Analyst sees risk for bull market, potential inflection at

Trump's inauguration

(Updates for morning U.S. trade)

By Alden Bentley, Naomi Rovnick and Ankur Banerjee

NEW YORK/LONDON/SINGAPORE Dec 27 (Reuters) - Global

stocks, the dollar and some Treasury yields looked set to wrap

up Christmas week on Friday with minor retracements of broad

up-trends, succumbing to a dearth of interest and participation

heading into the last weekend of the year.

Wall Street's main indexes opened lower, dampening an upbeat

holiday-shortened week that started out looking like a classic

"Santa Claus" rally was unfolding. The benchmark 10-year

Treasury yield was up slightly but hovered below a

near-eight-month high reached Thursday, while shorter-term

Treasury yields eased.

The U.S. dollar was headed for an almost 7% annual gain

while Japan's yen was set for a fourth consecutive year of

losses on Friday, as traders anticipated robust U.S. growth, as

well as tax cuts, tariffs and deregulation by the incoming

administration of President-elect Donald Trump, would make the

Federal Reserve cautious on rate-cutting well into 2025.

The Dow Jones Industrial Average was 0.56% lower

after the open. The S&P 500 fell 0.65%, leaving Wall

Street's benchmark on course for a 1% weekly gain. The Nasdaq

Composite was down 0.79% in early trade.

The Dow is up 14% in 2024, the S&P 500 is up 25% and the

tech-heavy Nasdaq is up 30%.

Analysts said stock markets could change direction as

investors returned from holiday and reassessed the risks of

elevated U.S. inflation under Trump for richly-valued Wall

Street equities.

"There is some potential upside left for this bull

market, but it is limited," said Pictet Asset Management chief

strategist Luca Paolini.

"(Trump's) inauguration day is a potential inflection

point and all the (prospective) good news will be in the price

by then," Paolini added.

MSCI's broad global share index was

0.32% lower on Friday to remain 1.07% higher for the week.

MSCI's broadest index of Asia-Pacific shares outside

Japan eased 0.12%, marking a 1.5% weekly rise,

while Tokyo's Nikkei rose 1.8%.

Europe's Stoxx 600 was 0.27% firmer on Friday

and 0.7% higher for the week.

The dollar index, which measures the currency against

six other major currencies, eased 0.09%, looking at a small

weekly gain, and to close 2024 with a more than six percent

year-on-year gain.

Dollar/yen was down 0.15%, but near levels last seen

in July, while the greenback was also showing a 5.3% gain this

month against the yen and a near 12% advance for 2024 against

the weakened Japanese currency. The euro, up 0.09%,

stayed close to two-year lows.

The BoJ held back from a rate hike this month. Governor

Kazuo Ueda said he preferred to wait for clarity on Trump's

policies, underscoring rising angst among central banks

worldwide of U.S. tariffs hitting global trade.

Fed Chair Jerome Powell said earlier this month that U.S.

central bank officials "are going to be cautious about further

cuts" after an as-expected quarter-point rate reduction.

The U.S. economy also faces the impact of Donald Trump, who

has proposed deregulation, tax cuts, tariff hikes and tighter

immigration policies that economists view as both pro-growth and

inflationary.

Traders, meanwhile, anticipate the Bank of Japan will keep

its monetary policy settings loose and the European Central Bank

will deliver further rate cuts.

Traders are pricing in 37 bps of U.S. rate cuts in 2025,

with no reduction fully priced into money markets until June, by

which time the ECB is expected to have lowered its deposit rate

by a full percentage point to 2% as the euro zone economy slows.

Higher U.S. rate expectations pulled the 10-year Treasury

yield, which rises as the price of the fixed income

security falls, to its highest since early May early on

Thursday, at 4.641%. It was last up 1.4 basis points at 4.595%.

The two-year Treasury yield, which tracks interest rate

forecasts, traded around 4.32% off 1.2 bp since late Thursday.

U.S. debt trends also sent euro zone yields higher, with

Germany's benchmark 10-year bund yield rising 4.8 bp to 2.372%

on Friday.

Elsewhere in markets, gold prices dipped 0.84% to

$2,612.20 per ounce, set for about a 27% rise for the year and

the strongest yearly performance since 2011 as geopolitical and

inflation concerns boosted the haven asset.

Oil prices were also set for a weekly rise as investors

awaited news of economic stimulus efforts in China, the world's

biggest crude importer. Brent crude futures rose 1% on

the day to $73.99 a barrel, 1.5% higher for the week.