(Recasts after PCE, adds Wall Street outlook)
By Natsuko Waki
LONDON, May 30 (Reuters) - Safe-haven government bond prices
regained poise on Friday after this week's tumble and world
stocks hit one-week highs as U.S. data showed a rise in personal
consumption and moderation in a key measure of inflation.
Data on the core Personal Consumption Expenditure index --
the Federal Reserve's favourite measure of inflation -- rose 0.1
percent as expected in April, compared with 0.2 percent in the
previous month. U.S. personal spending rose 0.2 percent.
This has eased concerns about inflation, which triggered a
global rout on government bonds in major economies on Thursday.
Euro zone government borrowing costs had surged to their
highest since the credit crisis erupted in August, while
better-than-expected economic data had sent benchmark Treasury
yields to a five-month high as investors priced in a chance of
an rate hike this year.
Scott Brown, chief economist at Raymond James & Associates
in St Petersburg, Florida said: "The inflation data is pretty
mild... The numbers were not quite as bad as they could have
been."
"Core PCE is important because the Fed is still looking for
evidence that higher food and energy prices are feeding through
to core inflation and consumer level. There is not that much
evidence yet."
The June Bund future <FGBLM8> rose 44 ticks after setting a
contract low on Thursday. The 10-year cash yield <EU10YT=RR> was
a couple of basis points lower at 4.42 percent after hitting
4.483 percent on Thursday. The benchmark 10-year U.S. Treasury
price rose 10/32 for a yield of 4.04 percent <US10YT=RR>.
The FTSEurofirst 300 index <> rose 0.7 percent while
MSCI main world equity index <.MIWD00000PUS> gained 0.3 percent
to a one-week high. Oil prices off last week's record high
brought some relief to airline stocks.
U.S. stock futures rose 0.3 percent <SPc1>, indicating a
firmer start on Wall Street after computer maker Dell <DELL.O>
unveiled stronger-than-expected earnings late on Thursday.
Emerging sovereign spreads <11EMJ> tightened 1 basis point
while emerging stocks <.MSCIEF> rose half a percent.
ENERGY AND INFLATION
There were underlying price pressures, which could haunt
investors especially in bonds. In the euro zone, inflation
surged back to a record 3.6 percent in May, reinforcing the view
that rising price pressures from costly oil would prompt the
European Central Bank to hike interest rates.
Goldman Sachs reckons food and energy are now adding on
average 1.9 basis points percentage point to headline inflation
in the United States, the euro zone and Britain, up from half a
point a year ago.
"Although there are signs that the marginal impact on the
price index from these components is waning, and wage growth
remains well contained, investors are alert to the possibility
of a broader deterioration in inflation dynamics," the bank said
in a note to clients.
The dollar was up 0.2 percent against a basket of major
currencies <.DXY> after hitting 1-1/2 week high on Thursday.
U.S. light crude <CLc1> reversed losses, rising 0.6 percent
to $127.44 a barrel -- after hitting a record peak above $135
last week.
Gold <XAU=> rose to $885.95 an ounce.
