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China stocks record best week since 2008

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Yen jumps as Ishiba set to become Japan's next PM

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Traders ramp up bets of ECB rate cut in October

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US PCE data softer than expected

(Updates prices as of 1241 GMT)

By Stella Qiu and Sruthi Shankar

SYDNEY/LONDON, Sept 27 (Reuters) - China's big stimulus

steps and benign U.S. inflation data pushed global stocks to

all-time highs on Friday, while the yen firmed sharply against

the dollar after Japan's former defence minister Shigeru Ishiba

looked set to become the next prime minister.

Europe's benchmark STOXX 600 index rose 0.5% to

touch a record high, with the German DAX, France's CAC

40 and Britain's FTSE 100 rising between 0.3%

and 1.2%.

Futures signalled the S&P 500 was set to build on

gains after notching a record high on Thursday. Data showed the

personal consumption expenditures (PCE) price index - the

Federal Reserve's preferred measure of inflation - pointed to a

further cooling of price pressures in August.

Traders in turn added to bets that the Fed will deliver a

second 50-basis-point interest rate cut in November.

The dollar weakened by as much as 1.5% to 142.60 against the

yen, reversing earlier gains of about 1% when traders

were bracing for hardline nationalist Sanae Takaichi, a vocal

opponent of rising borrowing costs, to become Japan's premier.

Ishiba, who won a closely fought contest in his fifth

attempt to lead the ruling Liberal Democratic Party, has said

the Bank of Japan (BOJ) is on the "right policy track" by ending

negative rates.

"Ishiba's victory is a relief for the BoJ as he generally

supports the BoJ's policy normalisation," said Min Joo Kang,

senior economist for South Korea And Japan at ING.

"Moreover, his fiscal policy should focus on reviving the

regional economy, which should also support sustainable

inflation and growth. We believe that the upcoming inflation

results and the Fed's interest rate actions will be the key to

gauge the BOJ's next move."

The dollar was last down 1.4% against the yen at 142.84 yen,

while futures tracking the Nikkei stock index dropped

about 5%.

CHINESE STIMULUS SPREADS CHEER

MSCI's world stocks index rose 0.4%, also

touching a new high, thanks to a big turnaround in Chinese

shares as Beijing ramped up pledges to revive sputtering

economic growth.

China's blue chips jumped 4.5%, bringing their

weekly rise to 15.7%, the most since November 2008. Hong Kong's

Hang Seng index also gained 3.6% and was up 13% for the

week, its best performance since 1998.

"We think there is further upside but a lot will depend on

the specific details in the coming days around the fiscal

stimulus," said Kiran Ganesh, multi-asset strategist at UBS

Global Wealth Management.

"If this is something more about stabilisation, then maybe

it doesn't have as big a global economic impact. But if this is

a long-term measure to increase the amount of fiscal spending

the government is doing, then that could be positive for global

growth."

They see a further upside of close to 10% in Shanghai

stocks.

China's central bank lowered interest rates and injected

liquidity into the banking system, and more fiscal measures are

expected to be announced before week-long Chinese holidays

starting on Oct. 1.

Commodities have had a good week on the back of the

stimulus. Iron ore clambered back above $100 a metric

ton and copper broke above the key $10,000 a ton mark.

Oil was set for heavy weekly losses on a report that Saudi

Arabia was preparing to abandon its unofficial price target of

$100 a barrel for crude as it gets ready to increase output.

Brent futures dipped 0.1% to $71.50 a barrel, and

are down 3.9% for the week. That should be good for global

disinflation as central banks ramp up rate cuts, and bullish for

consumer spending.

MORE ECB CUTS EXPECTED

The euro fell as much as 0.5% to $1.1125 after

data showed French consumer prices rose less than anticipated in

September and Spain's European Union-harmonised 12-month

inflation fell to 1.7% - the lowest reading since June 2023.

However, broad dollar losses following the U.S. data helped

the euro bounce off its lows, and it was last trading flat at

$1.1186.

Money markets priced in an 80% chance of an ECB rate cut in

October from around 20% early this week and 60% before the data.

"The trend of more rate cuts than investors may have

expected is something to position for," said UBS' Ganesh.

U.S. Treasury yields pulled back, having risen overnight on

low U.S. weekly jobless claims data. Two-year Treasury yields

slipped 3.3 basis points (bps) to 3.5878%, while

10-year yields also dropped around 3 bps to 3.7563%.