GLOBAL MARKETS-Futures dip as caution over Trump sets in; dollar down

By Amanda Cooper and Elizabeth Howcroft

LONDON/PARIS, Jan 24 (Reuters) - U.S. stocks looked set to pull back modestly from their all-time highs on Friday, as a degree of caution set in after President Donald Trump's latest comments on tariffs and trade.

The dollar headed for its biggest weekly drop in two months, under pressure from a greater sense of confidence among investors that the Federal Reserve may keep cutting interest rates this year.

Futures on the S&P 500 ESc1 and Nasdaq NQc1 were down around 0.1%, suggesting a slightly weaker start to trading on Wall Street later. A survey of U.S. business activity for early January later could show a modestly softer pace of growth in both the manufacturing and services sector.

Trump told business leaders at the World Economic Forum in Davos, Switzerland, on Thursday that he wanted to lower global oil prices, interest rates and taxes.

In an interview with Fox News on Thursday evening, Trump said his recent conversation with President Xi Jinping was friendly and he thought he could reach a trade deal with China.

"But we have one very big power over China, and that's tariffs, and they don't want them, and I'd rather not have to use it, but it's a tremendous power over China," he said.

China's stock markets and currency rallied on the back of his comments, leaving the blue chip index .CSI300 up 0.8% and the yuan CNH=D3 strengthened against the dollar, which fell 0.5% to 7.2492 in the offshore market.

Oil prices, meanwhile, initially fell after Trump's comments, but had recovered some poise by Friday, leaving U.S. crude futures CLc1 up 0.4% at $74.90 a barrel and Brent crude LCOc1 up 0.5% at $78.70.

Amelie Derambure, Senior Multi-Asset Portfolio Manager at Amundi in Paris said Trump's pro-America policies require lower oil prices.

"These types of policies could also benefit other players in the world, like Europe for instance, if we have a lower oil price that’s going to benefit Europe as well – so at last there is something that he wants to implement that is not detrimental to Europe," she said.

"It shows that he’s willing to negotiate and he wants to be maybe a bit more subtle this time."

European stocks reflected this greater optimism. The STOXX 600 .STOXX rose 0.3% on the day, driven by a burst higher in luxury goods retailers after solid earnings from Burberry BRBY.L.

BlackRock chief executive Larry Fink told a panel at the World Economic Form in Davos on Friday that it could be time to start investing money in Europe again.

"There's too much pessimism on Europe," he said during a panel debate on the global economic outlook. "I believe it's probably time to be investing back into Europe," he said, adding there was still progress to be made in areas such as capital markets union.

Surveys earlier on Friday showed euro zone businesses saw a modest return to growth at the start of the new year.

On the currency markets, the dollar weakened against most major currencies, leaving the U.S. currency index down 0.4% and heading for a weekly decline of 1.6%.

The yen was the exception, leaving the dollar up 0.17% on the day at 156.316 after the U.S. currency pulled off a session low of 154.845 following the Bank of Japan's widely-expected rate hike.

The BOJ raised interest rates to their highest since the 2008 global financial crisis, with attention now shifting to any clues from BOJ Governor Kazuo Ueda in his briefing on the pace and timing of further increases.

Treasury yields, which have retreated from January's highs as some of the worry about a renewed spike in inflation has faded, were steady on Friday.

The U.S. 10-year Treasury yield US10YT=RR was little changed at 4.6459%, below last week's 14-month high of 4.809%. US/

The European Central Bank and the Federal Reserve are due to meet next week as policymakers digest early moves of the Trump administration.