* Wall St weighs on global stocks gauge
* Volatile crude remains near 6-mo high
* Euro edges up vs dollar, yen ticks higher (Updates with U.S. markets, changes comment, dateline from previous LONDON)
By Rodrigo Campos
NEW YORK, May 17 (Reuters) - Stocks fell on Wall Street Tuesday after strong U.S. inflation data increased the probability of a rate hike from the Federal Reserve, while a global gauge of stocks cut its gains.
The U.S. dollar lost ground against a basket of currencies. Crude futures were volatile, with Brent prices matching the six-month highs hit Monday.
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. now see the probability of a rate hike after the Fed's November meeting as a toss up at 49 percent, up from roughly 42 percent on Monday, according to the CME FedWatch tool.
On Wall Street, stocks were led lower by declines in the more defensive, high-dividend paying sectors, which tend to be hurt when the expectation of higher rates increases. Dow Jones industrial average .DJI fell 59.24 points, or 0.33 percent, to 17,651.47, the S&P 500 .SPX lost 5.99 points, or 0.29 percent, to 2,060.67 and the Nasdaq Composite .IXIC dropped 12.11 points, or 0.25 percent, to 4,763.35.
The pan-European FTSEurofirst 300 share index .FTEU3 was little changed, while MSCI's gauge of stocks across the globe .MIWD00000PUS was up 0.13 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 inflation data was enough to push the Fed closer to tightening policy. The yen JPY= was up 0.03 percent versus the greenback at 108.98 per dollar and the euro EUR= rose 0.15 percent to $1.1333. 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. 10-year notes US10YT=RR rose 2/32 in price to yield 1.7447 percent, down from 1.753 percent on Monday.
Brent crude LCOc1 hit $49.47 per barrel, matching the six-month high hit Monday, and last traded at $49.41, up 0.9 percent on the day. U.S. crude CLc1 was up 1.1 percent at $48.23. CMCU3 fell 0.1 percent to $4,642 per tonne.
Spot gold XAU= was up 0.6 percent at $1,280.86 an ounce.