LONDON/SINGAPORE (Reuters) -Global stocks slipped on Friday after robust U.S. and German economic data bolstered prospects of interest rates staying higher for longer on both sides of the Atlantic.

MSCI's global share index, which recently hit intraday highs after a rush into artificial intelligence stocks ignited by strong results from $2.6 trillion chipmaker Nvidia, fell 0.2% and was set for a 0.9% weekly loss.

Europe's Stoxx 600 share index was 0.7% lower in early dealings, down 1% over the week.

Premier Miton Investors chief investment officer Neil Birrell said stock markets could enter a tug of war between strong economic growth and sustainably high interest rates reducing appetite for equities over fixed-income bonds.

"Earnings are strong but the bar for the sort of upside surprise needed to push markets higher is rising," he said.

"Bonds and equities are also very correlated at the moment and a rise in (U.S.) Treasury yields back towards 5% is the sort of thing people get worried about."

Stocks were shaken in October when the yield on the benchmark 10-year Treasury hit 5%. This key debt yield, which climbs as the price of the security falls in response to expectations of higher interest rates, touched 4.498% on Thursday and was last at 4.475%.

Data on Thursday showed U.S. jobless claims dropped, while business activity was expanding faster than economists had expected.

In Europe, an official report on Friday confirmed earlier estimates that Germany's economy expanded by 0.2% in the first quarter of 2024, recovering from a contraction at the end of last year.

The strong U.S. economic data, along with hawkish minutes from the Federal Reserve's last meeting earlier in the week, led traders to dial back their bets on U.S. rate cuts this year.

Markets are now pricing in just 35 basis points (bps) of easing in 2024, versus expectations of 150 bps of cuts at the start of the year, with a rate cut fully priced-in only in December..

ECB CUT IN JUNE

The European Central Bank (ECB) has all but committed a rate cut in June but its policymakers have warned further easing may not be warranted because they expect inflation, which has moderated substantially, to hover above their 2% target until 2025.

The yield on Germany's 10-year bund, last at 2.59%, has risen by the most in a week since mid-April.

The dollar index, which measures the U.S. currency against a basket of six major peers, is up more than 0.5% on the week to 105.06, its largest one-week rise since mid-April. [FRX/].

The U.S. currency has gained about 0.5% against the euro this week and about 1% against the Japanese yen,, which has weakened severely in recent months to 157 per dollar as the Bank of Japan kept monetary policy loose.

Data on Friday showed core inflation in Japan slowed for a second straight month in April, remaining above the central bank's 2% target but also signalling the BoJ would remain cautious about raising rates as consumer spending stays fragile.

Sterling was muted on Friday at $1.269, having touched a two-month high of $1.2761 on Wednesday as traders pondered data showing inflation did not slow as much as expected in April.

British Prime Minister Rishi Sunak announced on Wednesday he was calling a general election, with polls showing a big lead for his Labour Party rival Keir Starmer, who may become the nation's sixth leader in eight years following intense political turmoil.

British government bonds have underperformed major peers this week, with the 10-year gilt yield 13 basis points higher and the interest rate sensitive two-year yield up 18 bps to 4.5%.

In commodities, oil prices were steady, with Brent crude at $81.27.

Gold prices rose 0.4% to $2338.52 per ounce but was heading for a 3.2% weekly decline for the week, its biggest weekly drop since December. [GOL/]

(Editing by Lincoln Feast, Michael Perry and Alex Richardson)