GLOBAL MARKETS-Stocks struggle as bond yields, dollar regain traction

* European stocks struggle, Wall Street to restart lower

* MSCI Asia index falls 0.25 pct, Nikkei drops 1 pct

* 10-yr Treasury yields at 2.91 pct ahead of U.S. trading

* Commodities, EM FX struggle as dollar pushes higher

* India rupee skids amid state-run bank fraud concerns

By Marc Jones

LONDON, Feb 20 (Reuters) - A six-day rebound in world stocks spluttered to a halt on Tuesday as bond market borrowing costs regained traction and the dollar kicked firmly off a three-year low.

The rise in bond yields looked set to pressure Wall Street's main indexes when it reopens after a holiday on Monday, though there was plenty in Europe and Asia to subdue the mood anyway.

Europe's main bourses held steady, supported by softer domestic currencies but weakness across Asia, where Tokyo saw a 1 percent drop, meant MSCI (Frankfurt: 3HM.F - news) 's 47-country world share index was 0.25 percent in the red.

The dollar meanwhile continued its rebound from three-year lows, having recovered 1.5 percent since Friday on the view that the U.S. currency was due a correction after a brutal sell-off in recent weeks.

U.S. Treasury 10-year yields - the benchmark for global borrowing costs - were also on the up again and approaching 3 percent for the first time in four years.

"I just advise caution," Principal Global Investors' chief global economist Bob Baur said about stocks with Wall Street futures pointed around 0.7 percent lower.

"I'm not sure whether this (early February sell-off) was the dip to buy, there will probably be a relapse and then another relapse, before maybe around mid-summer stocks make another run up."

European bond yields pushed up in line with Treasuries, with traders also pondering who might succeed Mario Draghi as European Central Bank chief next year after Spain's economy minister was nominated for the bank's number two job.

The choice of a southern European for ECB vice president increases the likelihood of a northerner such as 'hawkish' German Bundesbank governor Jens Weidmann getting Draghi's seat, although there are already a number of Germans in top euro zone finance posts.

Back among equities, another catalyst of the recent market upheaval, the VIX volatility index - Wall Street's "fear gauge" - was moving higher again.

It was up to 21 percent ahead of U.S. trading, although that was still less than half the more than 50 level it peaked at earlier this month.

And though currency moves helped keep Europe level more broadly, banking giant HSBC and BHP, the world's biggest miner, both had torrid days - the worst in over a year in HSBC's case - after disappointing results.

U.S. traders winced too as retail behemoth Walmart's shares slumped more than 6 percent in premarket trade after it reported a lower-than-expected quarterly profit and a sharp drop in online sales growth during the busy holiday period.

EMERGING PRESSURE

The dollar's rebound also meant most emerging market currencies were under pressure.

South Africa's rand and Turkey's lira both gave back more of their recent gains, while growing concerns about fraud at India's second-largest state-run bank sent the rupee skidding to a near three-month low.

"Punjab National Bank (BSE: 532461.BO - news) will need to provide for at least a substantial portion of the exposure. As a result, the bank's profitability will likely come under pressure," rating agency Moody's said as it put it on a downgrade warning.

The rand's underperformance pulled it away from a three-year peak scaled last week after new President Cyril Ramaphosa took office.

The country is set to present what will be a crucial budget on Wednesday. There is growing speculation though about whether current Finance Minister Malusi Gigaba - who is due to deliver the budget - will keep his job.

Against the yen, the dollar climbed half a percent to 107.10 yen, having bounced back from a 15-month low of 105.545 set on Friday. It made similar ground on the euro, getting to $1.2335 compared with Friday's three-year low of $1.2556.

In commodity markets, Oil prices were mixed, with reduced flows from Canada pushing up U.S. crude while Brent sagged to $65.45 per barrel on the back of weaker stocks and the dollar's bounce.

Spot gold slipped 0.6 percent to 1,338 an ounce, also corseted by the dollar's bounce, while industrial metals including copper drifted lower for a second day in a thinner-than-usual trading due to new year holidays in China.

(Reporting by Marc Jones; Editing by Hugh Lawson)