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GLOBAL MARKETS-Stocks rally fades; bond yields, dollar rise

* Tech weakness weighs on Wall Street

* Bond yields continue to rise

* Dollar strength weighs on oil, gold (Adds close of European markets)

By Chuck Mikolajczak

NEW YORK, Nov 10 (Reuters) - A rally in major world stock markets lost some steam on Thursday as investors reassessed positions after a rally in the prior session, while U.S. bond yields continued to climb on fears of a revival in inflation under President-elect Donald Trump's fiscal policy.

Investors have quickly shifted to a focus on Trump's priorities, including tax cuts, an increase in defense and infrastructure spending, and bank deregulation. The expansionary policy is expected to lead to inflation.

After a strong start, stocks in Europe reversed course and turned negative. Europe's index of leading 300 shares was down 0.3 percent after earlier touching a two-week high, with utilities dropping 4 percent. Wall Street was also off earlier highs, pulled lower by a drop in the technology sector, which was on track for its biggest decline in two months.

"Tech stocks aren't really in the handbook," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

"They aren't really going to benefit from Trump's stimulus spending on infrastructure and are sort of sitting in the middle. They aren't part of the oversold sectors such as banks and health nor are they high dividend paying stocks that are getting sold off."

Banking shares in the U.S. continued to rally and were up more than 3 percent on the session and more than 10 percent over the past four, its best four-day run in over seven years.

Stocks on Wall Street had rallied on Wednesday following Trump's stunning win, with companies expected to benefit from his reflationary policies seeing the biggest climb. Bond proxy sectors like utilities and real estate had slumped.

The Dow Jones industrial average rose 206 points, or 1.11 percent, to 18,795.69, the S&P 500 gained 6.89 points, or 0.32 percent, to 2,170.15 and the Nasdaq Composite dropped 36.99 points, or 0.7 percent, to 5,214.08.

The benchmark S&P index retreated after rising as much as 0.9 percent earlier in the session.

MSCI's all-country world index advanced 0.35 percent after rising as much as 0.9 percent.

Bond yields continued their ascent, amid the expectation interest rates will rise under increased spending. Benchmark 10-year notes were last down 8/32 in price, yielding 2.0922 percent, up from 2.064 percent late on Wednesday. The yields rose as high as 2.125 percent, the highest since January.

The dollar also continued to strengthen and was last up 0.28 percent at 98.782 against a basket of major currencies. The greenback was on track for its fourth session of gains.

The strength in the dollar weighed on gold which fell 0.9 percent to $1,266.60 per ounce, on track for its third decline in four days. The dollar rise also was a drag on oil prices, with both Brent and U.S. crude down about 1 percent.

But copper jumped to a 16-month high of $5,714 a tonne and was last up 3.7 percent at $5,614.50 on expectations of a jump in infrastructure spending under a Trump presidency.

(Additional reporting by Yashaswini Swamynathan; Editing by Chizu Nomiyama)