*

Traders reduce bets on U.S. rate cuts in 2025

*

US inflation worries resurface before Friday's payrolls

data

*

New tariff report also in mix

*

European shares fall, U.S. futures down 0.35%

*

British assets underperform, gilts, stocks pound all sell

off

*

(Updates after European morning trading)

By Alun John

LONDON, Jan 8 (Reuters) - A global bond sell-off

continued on Wednesday hurting stocks and boosting the dollar on

the back of data the day before showing the U.S. economy is in

good health, likely limiting further rate cuts, as well as

renewed reports about U.S. tariffs.

The benchmark 10 year U.S. Treasury yield rose 3 bps to

4.71%, its highest since April 2024, building on Tuesday's 7 bp

gain.

The sell-off in bonds on Wednesday increased after a CNN

report that U.S. President-elect Donald Trump is considering

declaring a national economic emergency to provide legal

justification for a series of universal tariffs on allies and

adversaries.

This feeds into investor uncertainty, which, say analysts,

is already causing a higher "term premia" - effectively the

additional yield investors demand on longer dated bonds.

The report, and higher yields also hurt shares, with

European stocks last down 0.2% giving back an earlier

gain, while U.S. share futures likewise reversed course to trade

down 0.2%,.

The dollar gave back early losses against most major

currencies to trade higher.

Also sending U.S. Treasury yields higher in recent weeks

has been strong U.S. economic data causing investors to scale

back their expectations for the size of Federal Reserve rate

cuts this year.

Numbers on Tuesday showed U.S. job openings unexpectedly

increased in November while the U.S. service sector accelerated

last month, suggesting the Fed would be in no rush to cut rates.

"Obviously the big theme of the week is higher U.S. yields,

and stronger dollar," said Samy Chaar, chief economist at

Lombard Odier in Geneva.

"The U.S. cycle is an income-growth consumption-led cycle,

and when you look at it from that angle it gives a lot of

importance to labour markets - for it to continue people need to

have a job and incomes, and that's why the market reacted so

much to the (job openings) data."

"The second theme is the erratic and volatile political

comments from across the Atlantic."

Further U.S. employment data is due this week, with private

jobs numbers later Wednesday, but Friday's non-farm payrolls

figures are the most important. Inflation numbers next week are

January's other main data release.

BRITISH SELL OFF

The reaction in British markets on Wednesday was more

dramatic than that elsewhere, with the British 10 year gilt

yield rising over 10 basis points to 4.79%, its highest since

2008.

German Bund yields rose just 4 bps.

The pound fell 1.15% against the dollar to $1.2335

versus a 0.5% fall in the euro to $1.0286.

Domestic British midcap stocks also underperformed, dropping

1.76% versus a 0.4% fall for internationally focused British

large caps.

"It seems there's a lot of negativity around the UK," said

Lyn Graham-Taylor, senior rates strategist at Rabobank

"This increase in yields is increasing the chance of the

fiscal headroom falling to nothing so there's an increased

probability of having to raise taxes or cut spending in the next

budget."

Asian stocks had struggled earlier in the day with MSCI's

broadest index of Asia-Pacific shares outside Japan

dropping 0.57%.

Chinese markets were again the focus. Onshore blue-chips and

Hong Kong were each down 1.7% earlier in the day, but rebounded

and closed only just in negative territory as traders digested

Beijing's latest efforts to soothe investor nerves after a

stuttering start to the year.

In commodities, oil prices rose, on reduced supply from

Russia and OPEC members, with Brent crude up 0.27% at

$77.26 per barrel, while U.S. West Texas Intermediate (WTI)

crude was 0.63% higher at $74.74.

(Additional reporting by Ankur Bannerjee in Singapore and Harry

Robertson in London, Editing by Kate Mayberry, Christina Fincher

and Ros Russell)