* World shares drop after 3-day gains, retail frenzy slows * Oil at 1-year high on OPEC+ output cut * Benchmark bond yields rising, curves steepening * Volatility index falls to regular levels * Stealth China policy tightening in focus LONDON, Feb 4 (Reuters) - World stock markets were fighting for a fourth day of gains on Thursday as a near one-year high in oil prices, a revitalised dollar and rising bond yields refocused attention on inflation and normalising economies. With the WallStreetBets/Reddit retail trading tumult having eased this week, markets were back in their comfort zone of corporate earnings, economic data and central bank meetings. Oil was approaching $60 a barrel after OPEC and its allies extended production cuts. London, Frankfurt and Paris share indexes edged 0.1%-0.5% higher, helped by more German stimulus and as the dollar’s renewed swagger shoved the euro back under $1.20. Britain’s sterling also saw its biggest fall in three weeks as traders waited to see whether the Bank of England would formally endorse negative interest rates as a potential future option. At the end of last year, expectations were building that their introduction could be imminent. But Britain’s speedy COVID-19 vaccine rollout since then has eased those bets. “The BoE will maintain a quite cautious tone,” said Silvia Dall’Angelo, a senior economist at fund management firm Federated Hermes, adding it was likely that the bank would talk about negative rates. “But at this stage there is very little appetite to use this measure.” Hopes that the COVID pandemic can be brought to heel by extensive vaccination programmes, combined with expectations of unswerving global economic stimulus, has begun to see bond market focus returning to rising debt and possible inflation. Germany’s 30-year government bond yield on Thursday was almost back in positive territory for the first time since September. The gap between two- and 10-year U.S. Treasury yields at more than 100 basis points is now the widest in almost three years. New U.S. President Joe Biden had told House Democrats on Wednesday he was more concerned that too little would be provided rather than too much when it came to economic relief. U.S. stock futures were up in Europe. Wall Street had seen the NYSE Fang+ index of leading tech giants hit an intraday record high on Wednesday, thanks to a 7.4% gain in Google parent Alphabet following its strong earnings. But markets had been softer in Asia overnight. MSCI’s ex-Japan Asian-Pacific index fell 0.6%, led by 1.3% and 0.4% drops in South Korea and China. Japan’s Nikkei lost 1% as it ended a three-day winning streak. Rising Chinese short-term interest rates kept risk appetite low, though analysts also noted position adjustments before the Lunar New Year starting next week are likely to play a role too. Higher interest rates have raised worries that Chinese policymakers may be starting to shift to a tighter stance to rein in share prices and property markets. “There’s persistent speculation that the Chinese authorities may want to tighten its policy,” said Wang Shenshen, senior strategist at Mizuho Securities. Markets on the whole have calmed in the past few days with the Cboe Volatility index slipping to its lowest levels in over a week. As the retail trading frenzy seen last week faded, stock prices of GameStop and other social media favourites have steadied, although cryptocurrency Ethereum has been on a tear ahead of the introduction of futures contracts next week. Among the mainstream currencies, the dollar hit a near-three-month high versus the Japanese yen of 105.19. The euro lost 0.4% to $1.1989, having already hit a two-month low overnight. The single currency had failed to capitalise on improved sentiment in Italy after former European Central Bank chief Mario Draghi accepted the task of trying to form a new government in the country. Gold fell 1% to $1,810 per ounce though oil continued to advance after the OPEC+ alliance of major producers stuck to a reduced output policy and U.S. crude stockpiles fell to their lowest since March last year. U.S. crude rose 0.8% to $56.14 per barrel and Brent gained 0.6% to $58.89. Both stood near their highest levels in about a year. “OPEC have come in and said they are looking to remove the supply but the main driver is markets are starting to price in demand recovery, especially from emerging markets,” said Legal & General Investment Management’s Justin Onuekwusi.