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GLOBAL MARKETS-U.S. inflation data boosts stocks; yields slip
August 31, 2017 / 3:27 PM / 3 months ago

GLOBAL MARKETS-U.S. inflation data boosts stocks; yields slip

* Wall St opens higher; European stocks rebound

* Yields fall on weak inflation data

* Gasoline futures surge as refinery closures sap supply

* Dollar pares gains after data; euro dips on ECB bets (Updates to U.S. market open, adds details, changes byline, dateline, previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Aug 31 (Reuters) - An index of global equity markets rose to a three-week high on Thursday after data showed U.S. inflation increased at its slowest pace since late 2015, boosting expectations that the Federal Reserve will hold off from increasing interest rates again this year.

The dollar pared advances against a basket of major currencies, while U.S. Treasury prices gained slightly as simmering tensions with North Korea kept up demand for the safe-haven bonds.

U.S. consumer spending rose slightly less than expected in July and annual inflation increased at its slowest pace since late 2015. Investors’ focus will then turn to the monthly U.S. payrolls report, to be released on Friday.

“The fact that inflation remains below the Fed’s two percent goal makes it tougher for it to raise rates in the fourth quarter,” said Michael Sheldon, chief investment officer of RDM Financial Group at HighTower, in Westport, Connecticut.

MSCI’s world index, which tracks shares in 46 countries, was boosted by a higher open on Wall Street and rose 0.44 percent.

The Dow Jones Industrial Average rose 52.12 points, or 0.24 percent, to 21,944.55, the S&P 500 gained 10.05 points, or 0.41 percent, to 2,467.64 and the Nasdaq Composite added 37.21 points, or 0.58 percent, to 6,405.52.

European stocks rallied after Reuters reported that the euro’s rapid gains are worrying a growing number of European Central Bank policymakers, raising the chance asset purchases will be phased out only slowly. The pan-European STOXX 600 was up 0.85 percent.

The euro, which hit a more than 2-1/2-year high against the dollar on Tuesday, slipped on the Reuters report.

“I‘m skeptical myself that the euro’s strength is a genuine concern that the ECB has, but markets have taken a different attitude,” said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.

The greenback retreated after the U.S. inflation data and the dollar index, which measures the greenback against a basket of six major rivals, was little changed on the day at 92.912, after rising as high as 93.347.

Gold prices rose as the dollar weakened, while rising security concerns created by tensions on the Korean peninsula supported sentiment.

Spot gold was up 0.56 percent at $1,315.71 an ounce.

In the bond market, benchmark 10-year U.S. Treasury notes were up 5/32 in price to yield 2.1292 percent, down from 2.145 percent on Wednesday.

Trading volumes were relatively low, however, with some investors reluctant to buy Treasuries given that yields are near their lowest levels since November.

Oil prices rose, clawing back some of Wednesday’s losses, but U.S. crude remained on track for the steepest monthly losses in more than a year on demand concerns after floods knocked out a quarter of U.S. refining capacity.

Brent oil, was up 2.32 percent to $52.04 a barrel. U.S. crude was up 2.5 percent to $47.11.

Prices rallied in the oil products markets, with U.S. gasoline futures surging more than 13 percent to hit a two-year high well above $2 a gallon, buoyed by fears of a fuel shortage ahead of the Labor Day weekend that typically brings a surge in driving.

Reporting by Saqib Iqbal Ahmed; Additional reporting by Karen Brettell and Sam Forgione in New York and Sruthi Shankar and Tanya Agrawal in Bengaluru; Editing by James Dalgleish

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