(Updates prices and data)

By Naomi Rovnick and Rae Wee

LONDON SINGAPORE, Aug 16 (Reuters) - Global stocks

headed for their best week since November 2023 after encouraging

U.S. economic data soothed fears of an imminent recession, in a

rapid shift from a rout last week that kept investors wary of a

bumpy ride ahead.

MSCI's main world stock index hurtled

towards an almost 4% gain over five trading days, recovering

strongly from market turmoil last week generated by U.S.

recession fears and foreign exchange gyrations.

Europe's STOXX share index rose moderately in early

dealings on Friday and headed for a 2.3% weekly rise, with Asian

shares outside Japan notching up similar gains and U.S. stock

futures heralding a blockbuster week for Wall Street.

The VIX U.S. stock volatility index, broadly

considered the market's fear gauge, sat at benign levels of

about 15 after hitting a four-year high of 65 early last week.

The sharp turnaround in market sentiment came after a batch

of U.S. data this week showed inflation was moderating but

retail spending was robust.

That has helped the market narrative move away from

recession concerns, sparked by a weak U.S. jobs report in early

August, to confidence the economy can keep growing as price

pressures ease. Softer inflation data has reinforced

expectations of a Fed rate cut in September.

This so-called soft landing scenario may not hold, Aviva

Investors multi-asset portfolio manager Sotirios Nakos

cautioned, who suspected markets could keep swinging with every

new economic data point.

"The market went very quickly to price more negative data and

now what we're primarily seeing is the rapid unwinding of that,"

he said.

"I do not think a lot of money has participated in this

bounceback," he added, noting that thin summer trading

conditions in August would have exacerbated market moves.

S&P 500 futures rose 0.12% to put the blue chip

share index on course for an almost 4% weekly gain. Contracts

tracking the tech-heavy Nasdaq 100 also rose.

Markets expect the U.S. Federal Reserve to lower borrowing

costs from a 23-year high next month but have reduced their bets

of an emergency 50-basis-point cut to 25% from 55% a week ago,

the CME FedWatch tool showed.

"The totality of data tells us disinflation is continuing

and the Fed is almost certain to cut rates in September by 25

bps," said David Chao, Invesco's global market strategist for

Asia Pacific ex-Japan.

"But I do believe that the July inflation report diminishes

the chances of a super-size cut."

In Asia on Friday, Japan's Topix jumped nearly 3%

and Hong Kong's Hang Seng Index rose 1.8%.

The Topix was poised for a weekly gain of almost 8%, its

best performance since March 2020, following heavy losses last

week after a surprise Bank of Japan rate cut sent the yen

soaring against the dollar, wrecking yen-funded stock trades.

The Japanese currency eased to 148.96 per dollar,

on Friday, languishing near a two-week low of 149.40 hit in the

previous session and some distance away from last week's

seven-month peak.

Elsewhere in currency markets, the Swiss franc,

which also surged last week on the back of a flight to

safe-haven assets, looked set to lose about 0.7% for the week.

The euro struggled to break above the level of

$1.10 against a firmer dollar, which was buoyed by Thursday's

retail sales report.

Government bond trading was lacklustre, meanwhile, as a

return to confidence sapped demand for safe-haven government

debt securities.

The two-year U.S. Treasury yield, which rises as

the price of the debt falls and tracks interest rate

expectations, hovered near its highest in more than a week, to

last stand at about 4.087%. The benchmark 10-year yield

, which influences debt pricing worldwide, was 2

basis points (bps) lower at 3.907%.

Germany's equivalent bund yield was steady at

2.252%.

Brent crude futures dipped 0.3% to $80.82 per barrel

on Friday while U.S. West Texas Intermediate crude futures

eased 0.4% to $77.84 a barrel. Both benchmarks also

headed towards weekly rises of more than 1%.

Spot gold rose 0.3% to $2,462 an ounce.

(Editing by Shri Navaratnam, Clarence Fernandez and Ana

Nicolaci da Costa)