(Updates prices, adds fresh commentary)

By Naomi Rovnick and Ankur Banerjee

LONDON/SINGAPORE, May 24 (Reuters) - Global stocks

slipped on Friday after robust U.S. and German economic data

bolstered prospects of interest rates staying higher for longer

on both sides of the Atlantic.

MSCI's global share index, which recently

hit intraday highs after a rush into artificial intelligence

stocks ignited by strong results from $2.6 trillion chipmaker

Nvidia ( NVDA ), fell 0.2% and was set for a 0.9% weekly loss.

Europe's Stoxx 600 share index was 0.7% lower in

early dealings, down 1% over the week.

Premier Miton Investors chief investment officer Neil

Birrell said stock markets could enter a tug of war between

strong economic growth and sustainably high interest rates

reducing appetite for equities over fixed-income bonds.

"Earnings are strong but the bar for the sort of upside

surprise needed to push markets higher is rising," he said.

"Bonds and equities are also very correlated at the moment

and a rise in (U.S.) Treasury yields back towards 5% is the sort

of thing people get worried about."

Stocks were shaken in October when the yield on the benchmark

10-year Treasury hit 5%. This key debt yield, which

climbs as the price of the security falls in response to

expectations of higher interest rates, touched 4.498% on

Thursday and was last at 4.475%.

Data on Thursday showed U.S. jobless claims dropped, while

business activity was expanding faster than economists had

expected.

In Europe, an official report on Friday confirmed earlier

estimates that Germany's economy expanded by 0.2% in the first

quarter of 2024, recovering from a contraction at the end of

last year.

The strong U.S. economic data, along with hawkish minutes

from the Federal Reserve's last meeting earlier in the week, led

traders to dial back their bets on U.S. rate cuts this year.

Markets are now pricing in just 35 basis points (bps) of

easing in 2024, versus expectations of 150 bps of cuts at the

start of the year, with a rate cut fully priced-in only in

December..

ECB CUT IN JUNE

The European Central Bank (ECB) has all but committed a rate

cut in June but its policymakers have warned further easing may

not be warranted because they expect inflation, which has

moderated substantially, to hover above their 2% target until

2025.

The yield on Germany's 10-year bund, last at

2.59%, has risen by the most in a week since mid-April.

The dollar index, which measures the U.S. currency

against a basket of six major peers, is up more than 0.5% on the

week to 105.06, its largest one-week rise since mid-April.

.

The U.S. currency has gained about 0.5% against the euro

this week and about 1% against the Japanese yen,,

which has weakened severely in recent months to 157 per dollar

as the Bank of Japan kept monetary policy loose.

Data on Friday showed core inflation in Japan slowed for a

second straight month in April, remaining above the central

bank's 2% target but also signalling the BoJ would remain

cautious about raising rates as consumer spending stays fragile.

Sterling was muted on Friday at $1.269, having

touched a two-month high of $1.2761 on Wednesday as traders

pondered data showing inflation did not slow as much as expected

in April.

British Prime Minister Rishi Sunak announced on Wednesday he

was calling a general election, with polls showing a big lead

for his Labour Party rival Keir Starmer, who may become the

nation's sixth leader in eight years following intense political

turmoil.

British government bonds have underperformed major peers

this week, with the 10-year gilt yield 13 basis

points higher and the interest rate sensitive two-year yield

up 18 bps to 4.5%.

In commodities, oil prices were steady, with Brent crude

at $81.27.

Gold prices rose 0.4% to $2338.52 per ounce but was

heading for a 3.2% weekly decline for the week, its biggest

weekly drop since December.

(Editing by Lincoln Feast, Michael Perry and Alex Richardson)