GLOBAL MARKETS – Stocks rise, yields fall after data suggests U.S. inflation may have peaked

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* U.S. consumer spending rises, inflation slows

* Treasury yields fall

* Brent crude up $2

Elizabeth Dilts Marshall

NEW YORK, May 27 (Reuters) – Global stocks rose on Friday, with benchmark U.S. Treasury yields softening after data showed U.S. consumer spending increased in April and inflation slowed, the world’s largest economy likely to enter Two signs on the right track. growth this quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.9% last month, although inflation continued to rise in April, but slower than in recent months. The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain since November 2020.

The Fed called inflation a serious problem in the minutes of its May meeting released earlier this week. Most central bankers support two 0.5 percentage point rate hikes in June and July, as the group tries to tame inflation without causing a recession.

The Fed does leave room for a pause in rate hikes if the economy weakens.

Analysts said consumer spending and inflation data were encouraging and supported most of the above-2.0 annualized growth forecast for the second quarter.

“It’s important that the growth engine of the U.S. economy remains active,” said Joe Quinlan, head of market strategy, CIO, Merrill Lynch and Bank of America Private Bank. Weeks are seeing better, as far as inflation might peak here. Maybe we can avoid stagflation.”

At 2:50 p.m. ET (1850 GMT), the MSCI World Stock Index, which tracks stocks in 45 countries, was up 1.78%.

Global equity funds saw inflows in the week to May 25, the first week in seven years, according to Refinitiv Lipper data.

European shares rose 1.42% to hit a three-week high. Britain’s FTSE also hit a three-week high and was on track for its best weekly performance since mid-March.

The Dow Jones Industrial Average gained 368.34 points, or 1.13%, to 33,005.53, the S&P 500 gained 75.33 points, or 1.86%, to 4,133.17 and the Nasdaq Composite added 319.75 points, or 2.72%, to 12,060.40.

The yield on the benchmark 10-year Treasury note was last at 2.7432%. It hit a three-year high of 3.2030% earlier this month amid concerns the Fed may have to raise rates quickly to keep inflation in check.

Bank of America’s Quinlan said the lower yields showed the Fed’s monetary policy was successful in tightening credit and slowing prices.

“The 10-year yield suggests we don’t have to let inflation go above 9-10%,” Quinlan said. “We are approaching the peak of inflation.”

The two-year yield fell to 2.4839% as traders’ expectations for a hike in the federal funds rate rose.

German 10-year bond yields fell 4 basis points to 0.955%.

Asian stocks also benefited from hopes of stabilizing U.S.-China relations and more stimulus from the Chinese government.

U.S. Secretary of State Anthony Blinken said in a speech on Thursday that the United States would not stop China from developing its economy, but wanted it to abide by international rules, which some investors interpreted as beneficial to bilateral relations.

Emerging market stocks rose 2.01%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.23 percent, while Japan’s Nikkei rose 0.66 percent.

The generally positive market sentiment pushed the USD/currency index to a one-month low.

The dollar index was last down 0.02%, with the euro up 0.03% at $1.0727.

Oil prices were near two-month highs amid rising U.S. gasoline consumption during the summer and a potential European Union ban on Russian oil.

U.S. crude settled up 98 cents, or 0.86%, at $115.07 a barrel. Brent crude settled up $2.03, or 1.73%, at $119.43 a barrel.

Spot gold rose 0.2% to $1,852.83 an ounce.

(Reporting by Elizabeth Dilts Marshall, Additional reporting by Chuck Mikolajczak in New York, Carolyn Cohn in London, Stella Qiu in Beijing and Kevin Buckland in Tokyo; Editing by Chizu Nomiyama and Alistair Bell)