MORNING BID EUROPE-Stocks still buoyant as dollar shorts in focus

(A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own.)

LONDON, Aug 7 (Reuters) - The dollar paused for breath on Monday after its biggest one-day rally of 2007 on Friday. The surge came after a forecast-beating 209,000 rise in July U.S. payrolls and decent 2.5 percent annual rise in average earnings raised questions about markets scepticism over a third Federal Reserve interest rate rise by year-end.

The upbeat payrolls report is the latest sign of fresh pickup in the global economy around mid-year. Citi’s U.S. economic surprise index, although still in negative territory overall, is at its best levels in two months. Despite the bounceback in the dollar and rise in 10-year Treasury yields, however, interest rate futures markets still only put a 35 percent probability of another Fed rate rise by December.

As a result, the rosy combination of brisk growth with little fear of aggressive monetary tightening helped world stocks push ever higher. The Dow Jones clocked up its eighth straight record high on Friday, with MSCI’s main index of global stock markets following suit this morning and hit a fresh all-time record too.

Asian bourses were higher across the board, gaining about 0.5 percent each. Although in the black too, South Korean stocks underperformed as tensions with North Korea went up another notch with the introduction of new UN sanctions against Pyongyang on Saturday (Shenzhen: 002291.SZ - news) .

With (Other OTC: WWTH - news) speculative short positions on the dollar at their highest net level since May 2016, according the CFTC data releases on Friday, there will be a close eye early this week on whether either movements in U.S. rate futures or Korean anxieties will squeeze those bets further and extend the dollar rebound.

Otherwise, equity markets remain buoyant and volatility gauges low as the Q2 earnings season on both sides of the Atlantic (Shanghai: 600558.SS - news) is coming in with annual profit growth well in excess of 10 percent.

European stocks are expected to push higher again too at the open. Sterling was on the backfoot against a firmer dollar even as weekend press reports said the UK was prepared to agree a 40 billion euro Brexit divorce bill with the European Union. Data from payments company Visa (Xetra: A0NC7B - news) , meantime, showed British consumer spending fell for the third month in a row in July – its longest losing streak in over four years. * Europe corp events: PostNL (Swiss: PN6.SW - news) , Monte Dei Paschi

* Swiss July inflation

* German June industrial output

* UK July Halifax house prices

* Turkish government’s annual budget

* SAfrica Q2 jobless

* US Q2 earnings: CBS, Albemarle, Marriott, Tyson Foods (Frankfurt: 870625 - news) ,

* US June consumer credit

* St. Louis Fed President Bullard speaks in Nashville, Minneapolis Fed chief Kashkari speaks in Sioux Falls (editing by John Stonestreet)