By Samuel Indyk

LONDON (Reuters) -European shares rebounded on Friday, playing catch-up with a modest bounce the previous day on Wall Street, and the dollar index hit 100 for the first time in nearly two years as U.S. bond yields hovered near multi-year highs.

World stocks edged higher but were still on track for their first weekly loss in four as the prospect of aggressive global rate hikes and geopolitical uncertainty kept investors wary.

Risk appetite declined during the week as minutes from the Federal Reserve and European Central Bank showed policymakers are set to ramp up efforts to rein in inflation.

At 1023 GMT, the MSCI world equity index, which tracks shares in 50 countries, was up 0.1% on the day but for the week was down 1.3%. The pan-European STOXX 600 was 0.9% higher.

Futures for the S&P 500, Dow Jones Industrial Average and Nasdaq 100 were all up around 0.2%.

Eddie Cheng, head of international multi-asset portfolio management at Allspring Global Investments, said European stocks’ move higher was “probably just a little bit of a reprieve” from the week’s downward trend.

Investors remained preoccupied with the Fed raising rates and the war in Ukraine.

“The uncertainty is …increasing,” he said, noting fresh sanctions on Russia that the European Union formally adopted on Friday.

French presidential election risk was evident in bond markets as French borrowing costs rose while yields of other core European government bonds fell. Investors are concerned that far-right candidate Marine Le Pen could beat incumbent Emmanuel Macron.

“A Macron victory would be welcomed … as markets would price in …(a) continued business-friendly administration,” said Lale Akoner, senior market strategist at BNY Mellon Investment Management.

A Le Pen victory, while still unlikely, is now within the margin of error before the first round of voting on Sunday, opinion polls showed.

The spread between French and German 10-year yields was close to its widest since April 2020 at 56 basis points.

In U.S. bond markets, longer-dated Treasuries have borne the brunt of this week’s selling as traders see the long end hit the hardest by the Fed cutting its bond holdings.

The benchmark 10-year yield was up another 1.8 bps at 2.6716% on Friday, taking the weekly rise to 28 bps.

The dollar has been the prime beneficiary of the rising U.S. yields and the dollar index hit 100.00 for the first time in nearly two years as it headed or its best week in five.

The stronger dollar has heaped pressure back on the euro and the struggling yen. Japan’s currency was close to 124.00, while the euro fell to its lowest in over a month at $1.0848.

Brent crude futures edged higher after earlier falling below $100 per barrel. U.S. crude oil futures were up 0.6% to $96.63 per barrel.

Gold was little changed at $1,932 but set to eke out a small gain for the week.

Major cryptocurrencies posted small gains with Bitcoin trading at $43,591, although it was still on track for its second consecutive weekly drop.

(Reporting by Samuel Indyk and Elizabeth Howcroft; Editing by Nick Macfie and John Stonestreet)