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Global stocks rally after Fed signals cuts

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S&P 500 trades near all-time high

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Dollar and Treasury yields fall

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Oil rebounds

By Lawrence Delevingne

Aug 23 (Reuters) - Wall Street and global shares jumped

on Friday toward all-time highs, while Treasury yields slumped

and the dollar languished, after a speech by U.S. Federal

Reserve Chair Jerome Powell confirmed the United States would

soon begin interest rate cuts.

Powell, in remarks on Friday at the annual economic

symposium in Jackson Hole, Wyoming, said "the time has come" to

cut interest rates as rising risks to the job market left no

room for further weakness and inflation was in reach of the

Fed's 2% target, offering an explicit endorsement of an imminent

policy easing.

"Powell gave the market just enough dovishness to support

the market while avoiding the potential pitfall of inducing

fear," Carl Ludwigson, managing director at Bel Air Investment

Advisors, said in an email.

On Wall Street, the Dow Jones Industrial Average rose

1.14%, to 41,175, the S&P 500 gained 1.15%, to 5,634 -

near an all-time high - and the Nasdaq Composite was up

1.47%, to 17,877.

Europe's broad STOXX 600 index rose around 0.5%,

its highest level in over three weeks and clocking a weekly

advance for the third straight week. Asian shares outside Japan

had nudged down 0.1%, but Japan's Nikkei gained 0.4% as

investors digested inflation data and remarks from Bank of Japan

Governor Kazuo Ueda flagging a willingness to raise interest

rates if the economy and inflation turn out as forecast.

That left MSCI's all-country world index up

about 1.1%, and with early August's turmoil in the rear view

mirror, just above its mid-July all-time peak.

Traders increased bets for a bigger rate cut in September

following Powell's speech, with the fed funds futures now

pricing in a 37% chance of a 50 basis point cut next month, up

from about 25% late on Thursday. Traders are also pricing in

about 106 bps of cuts by the end of the year.

"The direction of travel is clear, and the timing and pace

of rate cuts will depend on incoming data, the evolving outlook,

and the balance of risks," Powell said in his speech.

U.S. Treasury yields fell across the board.

The yield on benchmark U.S. 10-year notes fell

5.9 basis points to 3.803%, from 3.862% late on Thursday. The

2-year note yield, which typically moves in step with

interest rate expectations, fell 9.7 basis points to 3.9132%,

from 4.01% late on Thursday.

Its German equivalent was steady at 2.226%.

The dollar turned lower and sterling rose to its highest in

more than two years on Friday.

The euro gained to $1.1189, up 0.7% on the day,

hitting a one-year high.

The Japanese yen strengthened, with the dollar down 1.36% at

144.27 after the Fed news and Bank of Japan Governor

Ueda's comments on rates.

Data out early in the day showed Japan's core inflation

accelerated for a third straight month, but a slowdown in

demand-drive price gains suggest no urgency for any immediate

rate hikes.

"FX is a relative game, so the expectation for the Fed to

join the other major banks soon in cutting rates is driving the

dollar lower," said Uto Shinohara, managing director and senior

investment strategist at Mesirow in Chicago.

Oil prices jumped more than 2%, rebounding after losses

earlier in the week on swelling U.S. crude stocks and a

weakening demand outlook in China.

Gold prices added about 1.1% to $2,510 an ounce, near

the record high of $2,513 hit just on Tuesday.