*

MSCI All Country World Index touches record

*

Euro STOXX 600 gains 0.5%

*

US inflation data below expectations, easing stagflation

fears

*

Fed rate cut expected, boosting Wall Street and Asian

markets

*

Nikkei attains record high above 43,000

*

Dollar falls to two-week low

(Updates prices in early afternoon European trading)

By Tom Wilson

LONDON, Aug 13 (Reuters) -

Global shares hit a record high and the dollar weakened on

Wednesday as investors cheered mild inflation data, and

expectations of a U.S. rate next month buoyed demand for riskier

assets.

The MSCI All Country World Index of

shares climbed for a second day and reached 951.74, an all-time

high. Japan's Nikkei stock index, meanwhile, set a fresh

peak for a second straight session.

European stocks advanced 0.5%, with German

shares adding 0.6%. Defence stocks led the

gains, up 1.2%.

U.S. inflation readings, which on Tuesday showed the

consumer price index (CPI) rising slightly less than forecast in

the year through July, indicated President Donald Trump's import

tariffs had yet to filter down to consumer prices.

That helped Wall Street scale new heights, supported by

increasing certainty that the Federal Reserve will cut interest

rates next month.

"The fact that CPI was broadly as expected was met with

relief, leading to equity gains and tighter credit spreads as

investors became increasingly confident about another rate cut,"

Deutsche Bank analysts wrote.

Also boosting market optimism was Trump's signing of an

executive order pausing triple-digit levies on Chinese imports

for another 90 days.

The positive mood was set to spread to Wall Street,

where a gauge of S&P 500 futures reached a record high,

pointing to a 0.2% advance.

In Japan, a Reuters poll that tracks the Bank of Japan's

quarterly business survey showed the Japanese manufacturers'

sentiment index improved for a second straight month.

Another report showed Japan's wholesale inflation slowed in

July, underscoring the central bank's view that upward price

pressure from raw material costs will ease.

The Nikkei rose for the sixth straight day,

breaking the 43,000 level for the first time and hitting a fresh

record high.

Risk-sensitive cryptocurrency ether rose to an

almost four-year high above $4,710.

FED CUT

The dollar index, which tracks the greenback

against a basket of major peers, fell for a second day to its

lowest in two weeks. It was last down 0.3% at 97.70.

The dollar lost 0.2% against the yen to 147.52.

The euro added 0.3% to $1.1711, after a 0.5% jump in the

previous session.

Traders are pricing in a 98% chance of a Fed cut in

September, up from about 57% a month ago, according to the CME

FedWatch tool.

Investors had been on tenterhooks about the inflation data

because it followed a surprisingly weak jobs report on August 1

and had the potential to stoke concerns about stagflation - when

an economy suffers both high inflation and high unemployment.

Trump has nominated White House adviser Stephen Miran to

temporarily fill a vacant board seat at the U.S. central bank,

stirring up speculation about presidential interference in

monetary policy.

And the White House said it was "the plan" that the Bureau

of Labor Statistics would continue to publish its closely

watched monthly employment report after Trump's pick to head the

agency, E.J. Antoni, proposed suspending its release.

Speculation the labour report would be halted has "done the

USD no favours and would have only incentivised foreign

investors to review their hedging ratios on U.S. investments,"

Chris Weston, head of research at Pepperstone, said in a note.

In sovereign bond markets, German 30-year bond yields fell

on Wednesday, retreating from the previous day's 14-year high

sparked by uncertainty linked to Trump's efforts to end the war

in Ukraine.

U.S. crude fell 0.2% to $62.99 a barrel.