(Updated prices at 2:45 p.m ET/ 1845 GMT)

NEW YORK/LONDON, May 29 (Reuters) - A global equities gauge fell on Wednesday while benchmark U.S. Treasury yields rose after a third weak government bond auction in a row, and investors worried about higher interest rates while they waited for a key U.S. inflation report due on Friday.

The dollar held firm, rising to a four-week high against the Japanese yen and bolstered by higher bond yields.

MSCI's gauge of stocks across the globe fell 8.15 points, or 1.03%, to 784.30, putting it on track for its biggest one-day percentage drop since April 30.

"On the equity market side we're getting close to month end" so people may be taking profits, said Charlie Ripley, senior investment strategist for Alliance Investment Management, also pointing to a weak 7-year U.S. Treasuries note auction following similar results for Tuesday's 2-year and 5-year note auctions.

"With the seven-year auction selling notes at a higher rate than the pre-auction level, that's three auctions in a row where yields came in higher. Higher rates are less attractive from an equity valuation standpoint," said Ripley.

He noted that investors focused on the Treasury auctions because investors were waiting for key economic data release.

The U.S. Core Personal Consumption Expenditures (PCE) price index report - the Federal Reserve's preferred measure of inflation - is not due out until Friday and the May labor report is not due until a week later.

At 02:45 p.m. the Dow Jones Industrial Average fell 409.30 points, or 1.05%, to 38,443.56, the S&P 500 lost 35.29 points, or 0.67%, to 5,270.75 and the Nasdaq Composite lost 75.47 points, or 0.44%, to 16,943.81.

Earlier Europe's STOXX 600 index closed down 1.08% for its biggest one-day percentage decline since mid April, as bond yields rose on worries interest rates will stay elevated for longer globally with fresh evidence of persistently high inflation in the region's biggest economy exacerbating concerns.

The U.S. 10-year Treasury yield hit a four-week high and was last up 7.8 basis points at 4.62%. The 2-year note yield, which typically moves in step with interest rate expectations, rose 2.6 basis points to 4.983%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was narrower at negative 36.5 basis points.

The 7-year yield rose to 4.64% from 4.56% late Tuesday.

In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.41% at 105.09, with the euro down 0.45% at $1.0806.

Against the Japanese yen, the dollar was up 0.32% at 157.67 after hitting its highest level since May 1.

Oil prices eased on worries over weak U.S. gasoline demand and concerns the Fed will keep interest rates higher for longer.

U.S. crude settled down 0.75% at $79.23 a barrel and Brent fell 0.74% at $83.60 per barrel.

Spot gold fell 0.93% to $2,338.92 an ounce as a stronger dollar, higher bond yields and hawkish comments from a Fed official on Tuesday still weighed on sentiment.

(Reporting by Sinéad Carew in New York, Harry Robertson in London; additional reporting by Kevin Buckland in Tokyo; Editing by Sam Holmes, Ros Russell, Chizu Nomiyama, Richard Chang and Daniel Wallis)