* Wall St lower as strong data raises chances of rate hike
* U.S. oil futures hit 7-month high
* Dollar slips vs basket of currencies (Updates prices, changes comment)
By Rodrigo Campos
NEW YORK, May 17 (Reuters) - Stocks fell on Wall Street on Tuesday after strong U.S. inflation data increased the probability of a rate hike from the Federal Reserve, while a global gauge of stocks ticked lower.
The U.S. dollar lost ground against a basket of currencies. Crude oil futures were volatile, with Brent prices matching the six-month highs hit Monday. U.S. crude touched its highest in seven months.
U.S. consumer prices recorded their biggest increase in more than three years in April, pointing to a steady inflation build-up. data "could make Fed officials more confident that they'll hit their inflation target. A more confident Fed is a Fed that is more likely to hike again this (northern) summer or fall," said Brian Jacobsen, chief portfolio strategist at Wells Fargo (NYSE:WFC) Funds Management in Menomonee Falls, Wisconsin.
Other U.S. data on Tuesday showed housing starts rose more than expected last month, suggesting the economy was regaining steam early in the second quarter.
Traders now see the probability of a rate hike after the Fed's November meeting as a toss-up at 51 percent, up from roughly 42 percent on Monday, according to the CME FedWatch tool.
At a joint appearance in Washington, Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams agreed that two to three rate hikes in the remainder of this year is reasonable. Wall Street, stocks were led lower by the more defensive, high-dividend paying sectors, which tend to be sold when more investors expect higher rates. Dow Jones industrial average .DJI fell 91.26 points, or 0.52 percent, to 17,619.45, the S&P 500 .SPX lost 9.78 points, or 0.47 percent, to 2,056.88 and the Nasdaq Composite .IXIC dropped 26.08 points, or 0.55 percent, to 4,749.38.
The pan-European FTSEurofirst 300 share index .FTEU3 ended down 0.03 percent, while MSCI's gauge of stocks across the globe .MIWD00000PUS was down 0.09 percent. the currency market, the British pound rose as much as 0.9 percent to $1.4524 GBP= , helped in part by a report that the "In" campaign held a 15-point lead over rival "Out" ahead of Britain's June 23 referendum on European Union membership. dollar index fell for a second consecutive day as traders doubted the U.S. inflation data was enough to push the Fed closer to tightening policy. The yen JPY= was up 0.06 percent versus the greenback at 109.08 per dollar and the euro EUR= rose 0.05 percent to $1.1322.
"If you are a hawk, you could see the CPI as being higher. But in reality, the numbers were pretty much on consensus," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago, in reference to Fed policymakers considered "hawks" for favoring tighter monetary policy.
Yields for two-year Treasury notes US2YT=RR rose as high as 0.819 percent on the strong inflation data, their highest since April 28. Three-year notes US3YT=RR also hit their highest since then, touching 0.979 percent.
Benchmark 10-year notes US10YT=RR rose 1/32 in price to yield 1.7534 percent, down from 1.753 percent on Monday.
U.S. crude prices hit seven-month highs on expectations of lower U.S. stockpiles. U.S. crude CLc1 touched $48.42, the highest since mid October, and was recently up 0.5 percent at $47.97.
Brent crude LCOc1 hit $49.58 per barrel, a six-month high, and last traded at $49.01, up 0.1 percent on the day.
Copper CMCU3 ticked up 0.1 percent to $4,652 per tonne.
Spot gold XAU= was up 0.2 percent at $1,276.56 an ounce.