GLOBAL MARKETS-Stocks, euro slip as ECB sets rate hikes, CPI looms

(Adds close of U.S. markets)

* Wall Street tumbles on fears of high CPI data read

* Europe gets signal of first ECB rate rise in a decade

* Yen stuck at 20-year low against dollar

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* Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK, June 9 (Reuters) - U.S. and European shares slid while benchmark euro zone yields hit an eight-year high on Thursday after the European Central Bank prepared to hike interest rates next month for the first time since 2011 and as pending inflation data spooked investors.

While the ECB decision was widely expected, the possibility of a larger hike from September weighed on sentiment as the euro zone economy grapples with slowing growth and soaring inflation.

Shares on Wall Street tumbled, with the S&P 500 and Nasdaq falling more than 2%, as the market awaited the release on Friday of the U.S. consumer price index for May.

"CPI is a big number," said Jack Ablin, chief investment officer at Cresset Asset Management LLC. "It's funny, the employment report historically has been important, but inflation is really taking center stage."

For months, markets have focused on how fast central banks have been moving to curb inflation. Investors now expect the Federal Reserve to hike rates by 50 basis points next week, especially if U.S. CPI data confirms an elevated inflation reading.

Ablin believes inflation peaked in March, with prices for lumber and copper already in decline.

But central bank rate hikes also could slow economic growth. The ECB said inflation would remain "undesirably elevated" for some time, and the White House has predicted Friday's data also will be elevated.

Bill Papadakis, a macro strategist at Lombard Odier, said markets see the ECB's policy rate peaking above 2% and portend slower growth.

"We think this would make monetary policy restrictive, and doubt that the euro region's economy could sustain such tight conditions, given its present challenges," Papadakis said.

The Reserve Bank of Australia this week hiked more than expected, noted Joe Manimbo, senior market analyst at Western Union Business Solutions, while "the ECB struck a somewhat less hawkish tone and as a result, we've seen the euro zigzag." He called the ECB's more gradual rate hikes "underwhelming for euro bulls."

The euro fell 0.93% to $1.0616 against the dollar, as the dollar index rose 0.73%. But bond yields across southern Europe rose sharply after the ECB flagged a string of future rate hikes.

"The ECB seems to be about six months behind the Fed at least in terms of action and probably attitude, too," Ablin said.

With euro zone inflation at a record-high 8.1%, the ECB had already flagged a series of moves, including ending its long-running asset buying program at the end of June.

The ECB spelled out plans to raise rates a quarter point next month and probably half a point again in September for its first 50-basis-point move in 22 years.

Germany's 10-year government bond yield - the main proxy for European borrowing rates - surged to its highest level in eight years at 1.47%. The bund later was little changed at 1.437%.

Yields on 10-year U.S. Treasury notes rose 1.6 basis points to 3.046%.

The ECB released new forecasts that raised inflation this year to 6.8% from a prior 5.1%, and cut its growth outlook to 2.8% from 3.7% due to sky-high energy and food prices.

Concerns about inflation and the impact on the economy sapped risk appetite.

The pan-European STOXX 600 index fell 1.36% and MSCI's gauge of global stocks closed down 2.02%.

On Wall Street, the Dow Jones Industrial Average fell 1.94%, the S&P 500 lost 2.38% and the Nasdaq Composite dropped 2.75%.

Asian stocks fell overnight. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.5%.

The Japanese yen slipped to a 20-year low against the dollar at 134.55. A widening policy divergence has pressured the yen, with the Bank of Japan remaining one of the few global central banks not yet signaling higher rates.

Oil prices dipped after parts of Shanghai imposed new lockdown measures. Still, strong gains in refined products supported crude prices near three-month highs.

U.S. crude futures fell 60 cents to settle at $121.51 a barrel and Brent settled down 51 cents at $123.07.

Gold prices as higher Treasury yields and a firm dollar dimmed bullion's appeal.

U.S. gold futures fell 0.2% to $1,852.80.

(Reporting by Herbert Lash and Marc Jones; Additional reporting by Andrew Galbraith in Shanghai; Editing by Jane Merriman, Lisa Shumaker, Alex Richardson and David Gregorio)