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LONDON, May 3 (Reuters) European stocks rose to near five-year highs on Wednesday on strong commodity prices and upbeat company earnings, before giving up gains, while the dollar eyed one-year lows against the euro.

Euro zone government bond yields drifted higher but investors were wary ahead of an interest rate setting meeting of the European Central Bank on Thursday.

U.S. stock index futures indicated a mixed start on Wall Street after wireless technology company Qualcomm raised its earnings forecast.

Trading volumes were sluggish in Europe with thin overnight trade on account of market holidays in Japan that continue until the weekend.

The Australian dollar was the biggest mover among major currencies, jumping 1 percent on the day versus the U.S. dollar to US$0.7697 after Australia's central bank lifted interest rates by a quarter of a point to 5.75 percent to stem inflation.

The interest rate outlook has been supportive for the euro, with strong data further cementing expectations of a rate hike.

The outlook for U.S. interest rates could become less cloudy after Federal Reserve Chairman Ben Bernanke speaks at 1600 GMT.

''We are looking to Bernanke's speech this afternoon, but the reality is that we are not likely to get anything new and we may have some corrective pressure helping the dollar ahead of it,'' said Adrian Schmidt, currency strategist at RBS Financial Markets. ''The services ISM is of some interest.'' The U.S. Institute for Supply Management's (ISM) April non-manufacturing index, due at 1400 GMT, is forecast to fall to 59.2 from 60.5 the previous month.

By 1235 GMT, the euro was up 0.15 percent at $1.2631, and near Monday's one-year high of $1.2690.

In a congressional testimony last week, Bernanke signalled rate hikes may pause soon, but he has since then been quoted as playing down the prospect of a pause in rate rises.

In the bond markets, the 10-year Bund yield was up 1.8 basis points at 3.99 percent. Last week, the yield rose above 4.03 percent -- its highest level since September 2004.

SHARES TURN LOWER The pan-European FTSEurofirst 300 index rose to its highest in nearly five years points, but then turned lower and was down 0.4 percent at 1,385.6 points.

The index is still up about 9 percent this year.

''It's been such a good performance but there looks like an element of profit taking with a lack of new momentum. We are looking for something else to push us forward,'' said Henk Potts, investment manager at Barclays Stockbrokers.

Metal prices were mostly steadier in London.

Quarterly results from most companies came in ahead of estimates, with a jump in trading income boosting Deutsche Bank's net profit to a record high.

Fiat doubled its 2006 profit forecast for its key automotive unit on strong sales.

In the energy markets, U.S. crude oil prices ticked up to $74.7 a barrel, within striking distance of a record $75.35 as mounting tension over Iran's nuclear plan compounded worries of global supply disruptions.

Gold prices hit a new 25-year high at $675 an ounce as fund buying persists, driven by a weaker dollar and worries about Iran's nuclear ambitions.

REUTERS SBJ RK1848

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