* Treasury, Bund yields touch multi-month lows
* Treasury 3-mo/10-yr yield curve hits flattest since Aug 2007
* Sterling on track for largest daily loss since January
* U.S. oil down after touching five-month high (Updates prices, comment)
By Rodrigo Campos
NEW YORK, March 21 (Reuters) - A measure of stocks across the globe rose in a volatile session on Thursday, led by gains on Wall Street, while the dollar rallied as traders continued to digest the Federal Reserve's uber-dovish stance.
Sterling tumbled, down 0.93 percent versus the U.S. dollar, as concern grew alongside the probability of a no-deal Brexit that would likely slow economic growth.
Expected losses in bank shares on the likelihood of lower interest rates were more than offset by gains in the technology sector, lifting Wall Street's benchmark .SPX to near its highest in five months.
"The markets believe that with the Fed on hold the economy will start to show improvement," said Carin Pai, executive vice president at Fiduciary Trust Company International, based in New York.
The Dow Jones Industrial Average .DJI rose 227.49 points, or 0.88 percent, to 25,973.16, the S&P 500 .SPX gained 31.9 points, or 1.13 percent, to 2,856.13 and the Nasdaq Composite .IXIC added 111.38 points, or 1.44 percent, to 7,840.35.
MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.70 percent.
The pan-European STOXX 600 index .STOXX lost 0.04 percent and emerging market stocks rose 0.10 percent.
Brazil's stock benchmark .BVSP fell sharply after former President Michel Temer, who left office three months ago, was arrested as part of a sweeping anti-corruption investigation known as "Car Wash."
The Bovespa fell 1.2 percent while the Brazilian currency lost 0.58 percent at 3.7981 per dollar.
YIELDS FALL ON DOVISH FED
With investors rushing to price in the end of the Fed's tightening cycle, benchmark Treasury yields touched their lowest since early 2018 and those on German Bunds - Europe's benchmark - fell to the lowest since October 2016.
The U.S. 10-year note was little changed in price, but the yield spread between the three-month Treasury bill US3MT=RR and the 10-year shrank to its narrowest level since August 2007. A narrow spread between the two yields indicates increased market expectations of a recession.
"The Fed has doubled down on its dovish tilt," said Matt Freund, head of fixed-income strategies at Calamos Investments. "The global economy is clearly softening and the Fed is looking at liquidity conditions."
Ten-year Bunds were offering buyers virtually nothing at yields of just 0.047 percent DE10YT=RR .
Benchmark U.S. 10-year notes US10YT=RR were little changed in price, yielding 2.5369 percent, from 2.537 percent late on Wednesday.
The 30-year bond US30YT=RR last rose 8/32 in price to yield 2.9635 percent, from 2.975 percent late on Wednesday.
With central banks having already cut rates to the bone and tried full-scale money printing, investors are concerned that many are now low on traditional ammunition to fight recessions.
The U.S. dollar recouped most of the ground lost in the previous session on the Fed's statement. Sterling continued to fall as Britain's Prime Minister Theresa May headed into an EU meeting in Brussels with the rising likelihood of a no-deal Brexit.
The pound GBP=D3 was recently trading at $1.3078, down 0.86 percent on the day.
Norway's currency shot up after its central bank, going against the grain, raised interest rates and signaled a 50-50 chance another hike will follow by mid-year. Norwegian krone NOK= gained 0.38 percent versus the U.S. dollar at 8.47.
Oil prices edged lower, but held near 2019 highs, supported by a tightening of global stocks, OPEC production cuts and U.S. sanctions on key producers Iran and Venezuela.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global assets in 2019
http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar
http://tmsnrt.rs/2egbfVh Emerging markets in 2019
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