* Dollar gets boost on Taylor Fed Chair prospects
* Sterling lifted by forecast-beating UK GDP
* German business confidence rises to record high
* European shares tread water
By Ritvik Carvalho
LONDON, Oct 25 (Reuters) - The dollar got a lift on Wednesday after a report that Republican senators were leaning towards John Taylor to be the next Federal Reserve chief, while share markets turned flat after a run of highs.
Sterling got a boost after data showed Britain’s economy picked up speed in the third quarter, bolstering the case for the Bank of England to raise UK interest rates next week for the first time in more than a decade.
On Tuesday, a source familiar with the matter said U.S. President Donald Trump had polled Republicans on whether they would prefer Stanford University economist John Taylor or current Fed Governor Jerome Powell to be the next U.S. central bank chief, and more senators preferred Taylor.
That helped send the index that measures the dollar against a basket of peers up 0.3 percent, even though it had gone flat on the day against the yen at 113.92.
The dollar also got support from the yield on the U.S. 10-year Treasury. It was at 2.42 percent having finally broken above the long-standing 2.4 percent barrier this week.
For Fed-focused traders, Taylor is seen as someone who could quicken the pace of interest rate increases compared with Fed Chair Janet Yellen, whose term expires next February.
“Anything that reduces the probability of Yellen being reappointed necessarily means the Fed looks more hawkish than it would otherwise,” said the RBC’s head of currency strategy Adam Cole, in London.
“The general perception is that there’s no one more dovish than Yellen,” he said.
Elsewhere in currencies, the Australian dollar skidded 0.7 percent to $0.7718, touching its lowest levels since mid-July after weak consumer price figures prompted investors to pare expectations of further tightening from the Reserve Bank of Australia.
The MSCI world equity index, which tracks shares in 47 countries, was flat as a muted open in Europe counterbalanced earlier gains in Asia.
MSCI’s broadest index of Asia-Pacific shares outside Japan ended the session up 0.1 percent as India, South Korea and Indonesia all hit record highs.
But a 0.5 fall for Japan’s Nikkei stock index saw it snap out of a record 16 straight sessions of gains. That had continued after the victory of Prime Minister Shinzo Abe’s coalition in Sunday’s election fuelled hopes of more cheap money policies designed to keep the yen weak.
Despite Wednesday’s share weakness, Abe’s victory should reassure overseas investors who had been concerned about policy continuity, and therefore “new money should come into the Tokyo market,” said Akio Yoshino, chief economist at Amundi Japan Ltd.
“The strength of corporate earnings should continue to support the Tokyo equity market” in the coming weeks, Yoshino said.
The pan-European STOXX 600 was down 0.1 percent, while euro zone blue chips gained 0.2 percent. France’s CAC 40 rose 0.1 percent. Britain’s FTSE 100 index fell 0.4 percent.
Emerging market stocks rose 0.3 percent.
Euro zone banks were up 0.5 percent, building on the previous session’s gains as investors anticipated Thursday’s European Central Bank meeting for the next catalyst for financials, which benefit from a rising rate environment.
Recent indications from policymakers have fanned speculation it will opt for a reduction in monthly asset purchases to 30 billion euros from January from 60 billion euros at present. Bets are also that it will keep that in place for 6-9 months.
German business confidence unexpectedly rose to a record high in October after falling for two months in a row, a survey showed on Wednesday.
Crude oil futures caught their breath after rising more than 1 percent overnight after top exporter Saudi Arabia said it was determined to end a supply glut. Prices also drew support from forecasts of a further drop in U.S. crude inventories as well as nervousness over tensions in Iraqi Kurdistan.
Brent crude was up 0.2 percent at $58.41 a barrel, while U.S. crude was down 0.3 percent at $52.31.
Spot gold was down 0.2 percent at $1,273.70 an ounce.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Ritvik Carvalho; additional reporting by Jemima Kelly in LONDON and Tokyo markets team; Editing by Jon Boyle)