(Updates as of 0520 GMT)

By Ankur Banerjee

SINGAPORE, May 31 (Reuters) - Asian stocks inched higher

on Friday, while the dollar was steady, keeping the pressure on

the yen, as investors await inflation readings from Europe and

the U.S. that will likely dictate the path of interest rates

globally.

A downward revision to consumer spending meant the U.S.

economy grew more slowly than expected in the first quarter,

data showed on Thursday, weighing on Treasury yields and the

dollar.

The revised GDP data also stoked expectations that the

Federal Reserve has scope to cut rates this year, with market

pricing putting a September cut at a coin toss, CME FedWatch

tool showed. For the year, traders are pricing in 35 basis

points of easing.

Financial markets have been biding their time for the main

data event of the week - Friday's April report on U.S. core

personal consumption expenditures (PCE) price index, which is

the Fed's preferred inflation gauge. Inflation report from the

euro zone is also due on Friday.

Ben Bennett, Asia-Pacific investment strategist at Legal And

General Investment Management, said the PCE reading should not

provide much of a surprise.

"But investors will still be very sensitive to even small

misses," he said.

The shifting expectations over interest rates has kept the

markets on edge, with European stock markets set for a subdued

open. Eurostoxx 50 futures was down 0.04% and FTSE

futures was flat.

MSCI's broadest index of Asia-Pacific shares outside Japan

rose 0.20%, pushing away from the three-week low

hit on Thursday. Analysts said month-end rebalancing by fund

managers helped lift equities in the region.

The index was set for a gain of 2.7% in May, rising for the

fourth straight month.

China stocks also rose, with the blue-chip index

up 0.20% while Hong Kong's Hang Seng index gaining 1%.

The upturn in China's markets came even as the nation's

manufacturing activity unexpectedly fell in May, an official

factory survey showed on Friday. The soft outcome kept alive

calls for fresh stimulus as a protracted property crisis

continues to weigh on businesses, consumers and investors.

Meanwhile, markets have so far shrugged of the Donald Trump

verdict after he became the first U.S. president to be convicted

of a crime on Thursday.

Traders are also looking over their shoulders for any hints

of intervention from the Tokyo authorities as the Japanese yen

flirts with levels that led to suspected bouts of

intervention late in April and early this month.

The yen was last at 156.80 per dollar, having touched

four-week lows of 157.715 on Wednesday. The currency weakened to

its lowest in 34 years at 160.245 on April 29, sparking at least

two suspected rounds of interventions.

Data on Friday showed core consumer prices in Japan's

capital rose 1.9% in May on rising electricity bills but price

growth excluding the effect of fuel eased, heightening

uncertainty on the timing of the central bank's next interest

rate hike.

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

against six rivals, was at 104.82, on course for 1.4% decline in

May, snapping a four-month winning streak.

The euro eased 0.12% to $1.08192 ahead of euro

zone inflation data for May that is set to influence the

European Central Bank's policy path. The central bank is all but

certain to cut rates in June but what comes after that remains

uncertain.

Markets are pricing 60 basis points of ECB cuts this year.

In commodities, oil prices eased after a surprise build in

U.S. gasoline stocks weighed on the market. Brent

futures was down 0.28% at $81.63 a barrel, while U.S. West Texas

Intermediate (WTI) crude CLc1 was down 0.35% at $77.64.

(Editing by Shri Navaratnam and Stephen Coates)