(Adds U.S. markets close)
* U.S. consumer spending increases, rise in inflation slows
* Wall Street rallies, snaps weekly losing streak
* Treasury yields fall
* Brent oil rises $2
NEW YORK, May 27 (Reuters) - Global markets enjoyed a
broad-based rally on Friday, while the yield on benchmark U.S.
Treasuries fell after data showed that U.S. consumer spending
rose in April and the uptick in inflation slowed, two signs the
world's largest economy could be on track to grow this quarter.
Consumer spending, which accounts for more than two-thirds
of U.S. economic activity, increased 0.9% last month, and
although inflation continued to increase in April, it was less
than in recent months. The personal consumption expenditures
(PCE) price index rose 0.2%, the smallest gain since November
Wall Street rallied on Friday after the data, with all three
major U.S. stock indexes bringing a decisive end to their
longest weekly losing streaks in decades.
The U.S. Federal Reserve, in minutes from its May meeting
released earlier this week, called inflation a serious concern.
A majority of the central bankers backed two half-a-percentage-
point rate hikes in June and July, as the group attempts to curb
inflation without causing a recession.
The Fed did leave room for a pause in hikes if the economy
Analysts said the consumer spending and inflation data was
encouraging and supported growth estimates for the second
quarter that are mostly above a 2.0 annualized rate.
"The growth engine of the U.S. economy is still alive and
kicking, and that's important," said Joe Quinlan, head of CIO
Market Strategy for Merrill and Bank of America Private Bank.
"Growth estimates for (the second quarter) are still good. There
is a better tone in the market than we have seen in recent
weeks, in terms of inflation possibly peaking here. Maybe we can
The MSCI world equity index, which tracks
shares in 45 nations, was up 2.12% at 4:45 p.m. EDT (2045 GMT).
Global equity funds saw inflows in the week to May 25 for
the first week in seven weeks, according to Refinitiv Lipper.
European shares hit a three-week high and rose
1.42%. Britain's FTSE also hit a three-week high, and
was heading for its best weekly showing since mid-March.
The Dow Jones Industrial Average rose 575.77 points,
or 1.76%, to 33,212.96, the S&P 500 gained 100.4 points,
or 2.47%, to 4,158.24 and the Nasdaq Composite <.IXIC added
390.48 points, or 3.33%, to 12,131.13.
The yield on benchmark 10-year Treasury notes
was last 2.7432%. It had hit a three-year high of 3.2030%
earlier this month on fears that the Fed may have to raise rates
rapidly to bring inflation under control.
Lower yields show the Fed's monetary policy is succeeding in
tightening credit and slowing down prices, said BofA's Quinlan.
"The 10-year yield is suggesting we don't have to have
inflation break above 9-10%," Quinlan said. "We are getting
close to a peak in inflation."
The two-year yield, which rises with traders'
expectations of higher fed fund rates, fell to 2.4839%.
German 10-year bond yields fell 4 bps to 0.955%.
Asian shares also benefited from hopes of
stabilizing Sino-U.S. ties and more Chinese government stimulus.
The United States would not block China from expanding its
economy, but wanted it to adhere to international rules,
Secretary of State Antony Blinken said on Thursday in remarks
that some investors interpreted as positive for bilateral ties.
Emerging market stocks rose 1.98%. MSCI's broadest index of
Asia-Pacific shares outside Japan closed 2.17%
higher, while Japan's Nikkei rose 0.66%.
The swing toward broadly positive market sentiment drove the
dollar to one-month lows against an index of currencies.
The dollar index fell 0.059%, with the euro up
0.06% at $1.073.
Oil prices were near two-month highs on the prospect of a
tight market due to rising gasoline consumption in the United
States in summer, and also the possibility of an EU ban on
U.S. crude settled 98 cents higher, or up 0.86%, at
$115.07 a barrel. Brent settled $2.03 higher, or up
1.73%, at $119.43 a barrel.
Spot gold added 0.2% to $1,852.83 an ounce.
(Reporting by Elizabeth Dilts Marshall in New York
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, Alistair Bell and Matthew