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Global shares rise, U.S. bond yields turn positive

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Trump inauguration prompts some uncertainty

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S&P, Dow eye biggest weekly gains since election week

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Dollar regains ground, still set for weekly loss

(Updates prices to early afternoon trading)

By Sinéad Carew and Samuel Indyk

NEW YORK LONDON, Jan 17 (Reuters) -

MSCI's global equities index rose on Friday while U.S.

Treasury yields turned higher and the latest crop of economic

data and upbeat earnings reports gave some support to riskier

assets.

The U.S. dollar strengthened against the yen and clawed back

some of Thursday's declines against major peers, while benchmark

U.S. Treasury yields, after a three session decline, hit a

two-week intraday low before swinging higher on the day.

Federal Reserve data on Friday showed U.S. manufacturing

output increased 0.6% last month after an upwardly revised 0.4%

rebound in November, likely as production picked up after a

factory worker strike ended.

Elsewhere, data showed U.S. single-family homebuilding

increasing to a

10-month high in December

, indicating that construction activity regained some

momentum at the end of the year, though rising mortgage rates

and a glut of new homes on the market could constrain recovery.

All three of Wall Street's major indexes were set for

gains for the day and for the week with the S&P 500 and the Dow

eying their biggest weekly gain since early November.

"We've seen the 10-year yield drop over the course of

the week ... It's been a major headwind for stocks this month,

and so with that easing of yields even a little bit today, it's

helping stocks grind higher," said Anthony Saglimbene,

Ameriprise Chief Market Strategist.

Boosting stocks this week was a comment from Fed

Governor Christopher Waller on Thursday that three or four rate

cuts this year are still possible if U.S. economic data weakens.

Also, softer than forecast core inflation data on Wednesday

pushed down the U.S. 10-year yield and supported stocks.

On top of the milder than expected inflation report

Saglimbene also cited strong bank earnings reports and outlook

for net interest income as well as benign credit trends.

"Investors today are feeling a little bit more confident

than when they entered the week," he said, but cautioned that

investors could see a lot of volatility ahead with Donald Trump

due to be inaugurated as U.S. President on Monday Jan. 20.

"We'll see what happens next week. I wouldn't put a

tonne of faith in this holding until tariffs and immigration

policy are clearer."

On

Wall Street

, at 12:04 p.m. the Dow Jones Industrial Average rose

433.70 points, or 1.01%, to 43,587.45, the S&P 500 rose

66.57 points, or 1.12%, to 6,003.78 and the Nasdaq Composite

rose 294.00 points, or 1.52%, to 19,631.65.

MSCI's gauge of stocks across the globe

rose 7.04 points, or 0.83%, to 855.67 and Europe's STOXX 600

index rose 0.69%.

In

U.S. Treasuries

, yields erased losses after earlier falling to their lowest

level in two weeks with some investors betting that strong

economic data could mean the Federal Reserve won't cut interest

rates as much as it indicated in December.

The yield on benchmark U.S. 10-year notes

rose 1.1 basis points to 4.617%, from 4.606% late on Thursday.

The 30-year bond yield rose 0.3 basis points to

4.8483% from 4.845% late on Thursday.

The 2-year note yield, which typically moves

in step with Fed interest rate expectations, rose 3.6 basis

points to 4.274%, from 4.238% late on Thursday.

In currencies the dollar index rose on the day but was

on track for a weekly decline after a six-week winning streak,

as investors awaited Trump's inauguration with hopes for more

clarity on the next administration's policies.

The index, which measures the greenback against a

basket of major currencies, rose 0.25% to 109.24.

The euro was down 0.11% at $1.0287 while against

the Japanese yen, the dollar strengthened 0.73% to

156.26.

But the yen was higher for the week as comments from

policymakers spurred bets for a quarter-point Bank of Japan rate

hike next week. Sources told Reuters that the BOJ was likely to

keep a hawkish policy pledge and raise rates next week.

Sterling weakened 0.53% to $1.2174 after worse

than forecast British retail sales in December.

In commodities, oil prices moved lower on the day but eyeing

a fourth consecutive weekly gain, as the latest U.S. sanctions

on Russia fueled expectations for supply disruptions.

U.S. crude fell 0.46% to $78.32 a barrel and Brent

fell to $81.22 per barrel, down 0.09% on the day.

Gold prices

were barely higher but on track for a weekly gain as

uncertainties around Trump's policies and renewed bets of

further rate cuts had lifted it above the key $2,700 level.

Spot gold rose 0.02% to $2,713.89 an ounce.