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Markets firm bets on Fed rate cuts

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Global stocks on track for weekly gain

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Gold trading near record highs

(Updates after European markets open)

By Iain Withers and Wayne Cole

LONDON/SYDNEY, Sept 12 (Reuters) -

Global stocks were on track for a weekly gain on Friday as

expectations for rapid-fire U.S. rate cuts promised to lower

borrowing costs globally, a relief to stressed bond markets and

a drag on the dollar.

European shares dipped 0.2% in opening trade, while

Nasdaq and S&P 500 futures were off 0.1-0.2%, having hit new

peaks overnight. The MSCI All Country

World Index nonetheless remained on track for a 1.7% weekly

gain.

Gold, meanwhile, was on track for a fourth weekly gain

in a row and traded near record levels, in a sign that investor

concerns about global economic uncertainties persist.

Stock markets across Asia had earlier made strong gains,

while Chinese stocks hit a 3-1/2 year high, spurred by

extravagant expectations for AI-related earnings growth.

The U.S. consumer price report had been the last major

hurdle to the Federal Reserve cutting interest rates next week,

and while it showed an increase in prices, markets remained

focused on weak job numbers in the previous week.

"Even if we have some weaker numbers on the job market,

the markets are really focusing on the Fed impact that will give

a new boost to growth in the future," said Amelie Derambure,

senior multi-asset portfolio manager at Amundi.

Veronica Clark, an economist at Citi, said the bank

continued to expect 125 basis points of Fed rate cuts over the

next five meetings.

Futures markets show a 93% chance of a quarter-point cut to

4.00%-4.25% next week, and a 7% chance of a half-point cut.

The yield on benchmark 10-year Treasury notes

rose 3 bps to 4.043%, having fallen below 4% for the

first time since April on Thursday.

ECB 'IN A GOOD PLACE'

In currency markets, the dollar index - which measures the

greenback against six peers - edged 0.2% higher to 97.757.

The dollar gained 0.5% versus the yen to 147.89,

after Japanese and U.S. finance ministers on Friday released a

statement reaffirming that neither country would target currency

levels in their policies.

The euro shed 0.1% to $1.171725, having received a

modest fillip on Thursday when the European Central Bank kept

rates unchanged and signalled that it was in a "good place" on

policy.

"This suggests the Governing Council is not inclined to ease

in the absence of a large growth shock," said Greg Fuzesi, an

economist at JPMorgan. "We have thus moved back our call for a

final rate cut from October to December."

After the meeting, ECB sources told Reuters the December

meeting would be the most realistic time frame to debate whether

another cut was needed to buffer the economy. Markets imply only

a one-in-six chance of a December easing.

Britain's economy recorded

zero monthly growth

in July, in line with forecasts but showing a sharp drop in

factory output, weighing on sterling which was down 0.3% at

$1.3536.

In commodity markets, gold firmed 0.3% to $3,644 an

ounce, just off the record top of 3,673.95 hit early in

the week.

Oil prices were subdued after the International Energy

Agency predicted an even larger record oil surplus next year as

OPEC continues to pump more product.

Brent was broadly flat at $66.38 a barrel, while

U.S. crude eased 0.1% to $62.31 per barrel.