Adds quote in paragraph 19, updates prices throughout

By Alun John and Dhara Ranasinghe

LONDON, July 3 (Reuters) -Shares around the world rose on Wednesday as comments from Federal Reserve Chair Jerome Powell reinforced expectations that U.S. rate cuts were not far off, briefly halting recent rises in Treasury yields and the dollar.

MSCI's world share index .MIWD00000PUS gained 0.3% to a new record high, with Europe's broad STOXX 600 index .STOXX 0.9% higher in early trading. .EU

Earlier in the day Asian shares rose, with Japan's Nikkei .N225 closing up 1.26% from the previous day, chasing its record high touched in March, after Wall Street's main indexes closed higher on Tuesday. .N

Shaping the broader economic and market picture were Powell's Tuesday remarks that the U.S. is back on a "disinflationary path", although he cautioned that policymakers need more data before they can consider cutting interest rates.

Powell's comments sent U.S Treasury yields lower, with the yield on the 10-year note steady at 4.43% on Wednesday, moving further from Monday's one-month high of 4.493%. US10YT=RR US/

"There was a bit of change of tone from Powell," said Michael Metcalfe, State Street Global Markets' head of macro strategy.

"Most recent inflation prints have been encouraging. The idea that inflation is not as sticky as anticipated and you could get some policy support is encouraging."

Traders are currently pricing in a 69% chance of the Fed cutting rates in September and as many as two rate cuts this year.

That is a far cry from the more than 150 basis points of easing expected at the start of the year, but a step up from a few months ago when investors saw no Fed cuts at all this year as plausible, if not their base case.

Investors were also weighing data showing a tight U.S. labour market and will switch their focus to Friday's nonfarm payrolls data, with U.S. markets shut on Thursday and closing early on Wednesday.

There is less on the calendar in Europe on Wednesday, but the focus is on Britain's national election on Thursday and the second round of voting in France's parliamentary elections on Sunday.

Markets have been largely unconcerned by Britain's election - polls point to a win by the opposition Labour party - though French politics have caused sharp swings in recent weeks.

Data from China meanwhile showed the country's services activity expanded at the slowest pace in eight months and confidence hit a four-year low in June, dragged by slower growth in new orders.

Onshore Chinese blue chips .CSI300 were an outlier among rising indexes in Europe and Asia, slipping 0.24%, and China's yuan eased to a seven-month low against the dollar..SS CNY/

YEN VIGIL

The pause in Treasury yields' climb halted gains in the dollar, at least in the short term. The euro was last up 0.08% at $1.0754, and the pound up 0.1% at $1.2696. FRX/

Even the yen was slightly calmer, though the dollar still climbed to a new 38-year high of 161.90 yen. The yen has dropped more than 12% against the dollar this year, hurt by the wide gap between interest rates in the U.S. and Japan.

Traders have been on the lookout for signs of Japanese authorities intervening in the currency market to prop up the frail yen, but some analysts suggested this threshold might be further away than current levels.

"I can't see the yen turning around until Fed easing is in view," said Kit Juckes, FX strategist at Societe Generale.

In commodities, oil prices rose as U.S. industry data boosted hopes of solid fuel demand during the summer driving season in the top oil-consuming nation. O/R

Brent crude oil futures LCOc1 were 6 cents higher at $86.30 a barrel, while U.S. West Texas Intermediate crude futures CLc1 ticked up 2 cents to $82.83 per barrel.

Spot gold was up 0.7% at $2,345 an ounce.

Reporting by and Alun John and Dhara Ranasinghe, additional reporting by Nell Mackenzie in London; Ankur Banerjee and Sameer Manekar in Singapore; Editing by Muralikumar Anantharaman, Sonali Paul, Kim Coghill and Jan Harvey

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