GLOBAL MARKETS-Stocks rise, Treasury yields edge down as US inflation softens

Updates prices after oil settlement

By Sinéad Carew and Amanda Cooper

NEW YORK/ LONDON, Dec 18 (Reuters) - MSCI's global equities gauge rose on Thursday and Treasury yields dipped after soft U.S. inflation data raised investors' hopes about more Federal Reserve rate cuts, while Micron's results helped to reinvigorate Wall Street's "rollercoaster" sentiment around AI stocks.

U.S. consumer prices increased less than expected in the year to November, with the U.S. Consumer Price Index rising 2.7% year-on-year versus economists' forecast of 3.1%, leading to some choppy trading in the dollar as investors also digested updates from UK and European policymakers.

After Wednesday's technology sector sell-off driven by worries about AI-inflated valuations, chipmaker Micron's blowout forecast provided some reassurance, sending heavyweight U.S. tech shares higher.

Garrett Melson, portfolio strategist, Natixis Investment Managers, said Micron's news was "helping to at least stabilise some of the sentiment around AI, which has been a rollercoaster."

"It's this kind of back and forth between skepticism and real confidence. Today we're back on the confidence side of things," he said.

And while the inflation data was "compromised" by collection and release delays due to the 43-day government shutdown through October into mid-November, Mark Luschini, chief investment strategist at Janney Montgomery Scott, said it "still gives some indication that perhaps prices continue to decelerate."

"Today's inflation report set the stage for a rally in stock prices that had been somewhat downtrodden over the last week or so," said Luschini, adding that "this is a seasonably favorable time of the year for stock prices so the bias tends to be good news being treated as really good news."

The Fed, which has been balancing labour market weakness with still elevated inflation, has signalled only one rate cut next year but traders have been betting on two and estimates were little changed after Thursdays data. U.S. President Donald Trump said late on Wednesday the next Fed chair, replacing Jerome Powell in May, would be someone who believed in lowering rates "by a lot."

On Wall Street at 02:34 p.m., the Dow Jones Industrial Average <.DJI> rose 83.01 points, or 0.17%, to 47,966.37, the S&P 500 <.SPX> rose 51.88 points, or 0.77%, to 6,773.27 and the Nasdaq Composite <.IXIC> rose 301.16 points, or 1.33%, to 22,994.48.

MSCI's gauge of stocks across the globe < .MIWD00000PUS > rose 6.02 points , or 0.60 %, to 1,001.07 and earlier the pan-European STOXX 600 < .STOXX > index closed up 0.96%.

In currencies, the dollar index went from red to slightly green as investors digested the data.

The dollar index < =USD >, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.06% to 98.43.

Sterling GBP= strengthened 0.08% to $ 1.3386 after the Bank of England cut interest rates but signalled limited scope for further easing.

The euro EUR= was down 0.12% at $ 1.1725 after the European Central Bank kept euro zone rates unchanged as expected and struck a more upbeat tone on the economy.

Against the Japanese yen JPY=, the dollar weakened 0.1% to 155.51 ahead of the Bank of Japan's expected rate hike on Friday.

In the bond market, the yield on benchmark U.S. 10-year notes < US10YT=RR > fell 3.1 basis points to 4.12 %, from 4.151 % late on Wednesday while t he 30-year bond < US30YT=RR > yield fell 2.7 basis points to 4.8009 %.

The 2-year note < US2YT=RR > yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 2.3 basis points to 3.462 %, from 3.485 % late on Wednesday .

In energy markets, oil prices settled up for a second day as investors assessed the likelihood of further U.S. sanctions against Russia and the supply risks posed by a blockade of Venezuelan oil tankers.

U.S. crude CLc1 settled up 0.38%, or 21 cents, at $56.15 a barrel and Brent LCOc1 settled at $59.82 per barrel, up 0.23%, or14 cents, on the day.

Gold prices edged down even after softer-than-expected U.S. inflation data bolstered expectations of Federal Reserve rate cuts in 2026.

Spot gold < XAU= > fell 0.2% to $ 4,332.23 an ounce. U.S. gold futures < GCc1 > fell 0.27% to $ 4,335.80 an ounce.

(Reporting by Sinéad Carew in New York, Amanda Cooper in London, Stella Qui in Sydney. Editing by Jane Merriman and Nick Zieminski)

((sinead.carew@thomsonreuters.com))