GLOBAL MARKETS-Stocks halt rally, BoE minutes stun markets

(Fixes spelling in headline)

* Stocks fall, BoE minutes raise specter of rate hike

* Fed minutes also on tap

* Euro below $1.33 for first time in nearly a year

By Jamie McGeever

LONDON, Aug 20 (Reuters) - World stocks fell on Wednesday as

investors braced for the possibility that a major central bank

could raise interest rates this year after Bank of England

minutes showed two of the bank's nine rate-setters voted for a

hike earlier this month.

Sterling and UK bond yields also rose after the unexpected

shift closer to higher British rates, while record-low euro zone

money market rates pushed the euro to its weakest against the

dollar in a year.

As central bank policy signals and relative interest rates

eclipsed geopolitical developments, investors were also braced

for the release later Wednesday of minutes from the last Federal

Reserve policy meeting.

The Fed minutes come ahead of Fed Chair Janet Yellen's

keenly-anticipated address to the annual gathering of

policymakers in Jackson Hole, Wyoming, on Friday.

"A split vote shows that the first rate hike is

approaching," said Philippe Gudin, an economist at Barclays (LSE: BARC.L - news) ,

referring to the BoE.

"We expect the support for a rate increase to grow in the

coming months and we foresee the first hike taking place before

year end," he said.

At midsession, Britain's FTSE was down half of one

percent at 6,748 points, Germany's DAX was off a

similar amount at 9,293 points and France's CAC was down

a third of one percent at 4,238 points.

Two of the biggest stock market movers in Europe were

brewers. Shares (Frankfurt: DI6.F - news) in Denmark's Carlsberg (Other OTC: CABGY - news) sank as much

as 6 percent after the company said deteriorating conditions in

Russia would hit overall profit this year. Dutch

brewer Heineken (Other OTC: HEINY - news) jumped as much as 6 percent after

first-half profit rose.

Stocks had been underpinned this week as attention shifted

away from the Ukraine-Russia conflict, and by strong U.S.

housing data and lower-than-expected UK inflation figures.

The MSCI index of world stocks slipped 0.1

percent to 428 points, and U.S. futures pointed to losses of

around 0.1 percent at the open.

BOE, ECB DIVERGENCE

Sterling rose 0.2 percent to $1.6650, rebounding from

a five-month low earlier this week around $1.66, and Britain's

10-year gilt yield rose 3 basis points to 2.43 percent

.

Elsewhere in currencies, the dollar surged to a near

one-year high against a basket of major counterparts. It hit

103.26 yen, its highest since early April, after Japan

reported a larger-than-forecast trade deficit in July.

The euro slumped below $1.33 for the first time in 11

months after German producer prices fell more than expected in

July, fuelling concerns that deflationary forces are spreading

to the core of the 18-nation bloc.

"This is a combination of expectations of very low rates for

a very long period of time, but also a reflection that the

market has raised the odds of the European Central Bank being

drawn into taking more serious action," said Elwin de Groot, a

senior market economist at Rabobank in Utrecht, The Netherlands.

Overnight interbank lending rates in the euro zone are

coming ever closer to zero. Eonia rates are now just 0.005

percent

Key U.S. and euro zone government bond yields were little

changed. The 10-year German government bond yield hovered just

below 1 percent, the 2-year German yield was steady

just below 0 percent after an auction and the 10-year

U.S. yield was flat at 2.40 percent.

The 10-year Treasury yield had risen for the last three

days, rebounding from a 14-month low of 2.30 percent last week.

In commodities, gold was stuck below $1,300 an ounce XAU=

after shedding 1.3 percent in the last three sessions.

Brent crude futures recovered from near 14-month lows,

ticking up a third of one percent to $101.95 a barrel,

although ample supplies are putting prices at risk of renewed

losses.

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(Reporting by Jamie McGeever, additional reporting by Marius

Zaharia; Editing by Toby Chopra)