Global stocks, dollar rebound on Chinese, U.S. data

By Herbert Lash

NEW YORK (Reuters) - Global stocks and the dollar rebounded on Friday from losses a day earlier, buoyed by a surprising rise in Chinese producer prices and U.S. economic data that bolstered expectations the Federal Reserve would raise interest rates in December.

The dollar was poised for its largest weekly gain in more than three months, with rebounding U.S. retail sales and a rise in producer prices last month indicating the economy regained momentum in the third quarter after a lackluster first-half.

U.S. producer prices rose in September to post their biggest year-on-year rise since December 2014, while retail sales gained 0.6 percent after a 0.2 percent decline in August.

Fed Chair Janet Yellen late in the session told a Boston luncheon that U.S. economic potential is slipping and may need aggressive steps to rebuild it in remarks that sent a ripple through financial markets, analysts said.

"She's going to look for every excuse not to hike rates. So by all means, this is very much on the dovish side," said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California.

"If the markets have a fit, they're not going to hike. If the markets are going to have smooth sailing until December, 'yes,' we'll hike," Merk said.

Yields on longer-dated Treasury securities ticked up, while U.S. equities see-sawed on Yellen's comments.

Peter Kenny, senior market strategist at Global Markets Advisory Group in New York, said Yellen has kept everyone guessing as to when the next rate hike will occur, which has led to an inconsistent and trendless trading pattern in equities.

The dollar index, which tracks the greenback against a basket of six major currencies, added 0.49 percent to 97.997 and was up 1.3 percent for the week.

In China, September producer prices unexpectedly rose for the first time in nearly five years and consumer inflation also beat expectations, easing some concerns about the health of the world's second-biggest economy.

Disappointing Chinese trade data on Thursday had rattled investors and pushed global equity markets to three-month lows.

European shares tracked Asian markets higher and Wall Street jumped as strong results from JPMorgan and Citigroup lifted financial stocks. Shares later pared gains.

Shares of JPMorgan , the biggest U.S. bank by assets, fell 0.10 percent after it beat forecasts for revenue and profit. Citigroup rose 0.60 percent after earnings fell less than expected.

In Europe, the pan-regional FTSEurofirst 300 index rose 1.33 percent to close at 1,341.54, while MSCI's all-country world index of equity markets in 46 countries rose 0.31 percent.

The Dow Jones industrial average rose 58.62 points, or 0.32 percent, to 18,157.56. The S&P 500 gained 2.19 points, or 0.1 percent, to 2,134.74 and the Nasdaq Composite added 1.14 points, or 0.02 percent, to 5,214.48.

Oil slipped below $52 a barrel, giving up earlier gains, as abundant crude supplies outweighed tighter U.S. fuel inventories and plans by the Organization of the Petroleum Exporting Countries to cut output.

Global benchmark Brent settled down 8 cents at $51.95 a barrel. U.S. crude slid 9 cents to settle at $50.35 a barrel.

The gain in Chinese producer prices helped lift U.S. Treasury yields, with the benchmark 10-year note down 15/32 in price to yield 1.7906 percent.

Rising U.S. Treasury yields, on the growing perception the U.S. Federal Reserve will raise interest rates in December, pushed euro zone government bond yields higher.

The benchmark 10-year German bund rose 2 basis points to 0.05 percent.

The dollar rose 0.48 percent to 104.18 yen, while the euro fell 0.72 percent to $1.0976 .

(Reporting by Herbert Lash, additional reporting by Sam Forgione in New York; Editing by Nick Zieminski)