LONDON/SINGAPORE (Reuters) -Traders ramped up Fed rate cut bets on Thursday, pinning the dollar near multi-week lows, while a global stock rally paused as investors awaited data on U.S. producer prices later in the day that may show how tariffs are impacting inflation trends.

MSCI's global share index flatlined, after hitting all-time peaks for the two previous sessions, while an equivalent gauge of Asian equities outside Japan lingered near its loftiest level since September 2021.

Futures markets signaled Wall Street stocks were set for a muted start, having led global shares higher all week and hit records on Tuesday and Wednesday.

This blistering global rally has been fueled by strong U.S. tech earnings and speculation that Federal Reserve rate cuts will help protect businesses and households from the impact of White House tariffs.

Traders now see a September cut as almost certain, per CME's FedWatch tool, and the U.S. administration is continuing to pressure the Fed to ease more quickly. Treasury Secretary Scott Bessent said on Wednesday that the Fed funds rate, which has been in a range of 4.25%-4.5% since December, should be as much as 175 bps lower.

Monthly U.S. jobs data came in surprisingly weak on Aug. 1, but a U.S. producer prices report later on Thursday could shift the market's focus towards the risks of tariffs taking inflation too high for the Fed to cut rates, investors said.

About 70% of global investors expect U.S. stagflation to become the dominant market narrative within three months, a Bank of America survey found this week.

"Inflation is starting to come through. It's not massive yet but that could certainly continue in coming months and amplify that part of the story," Russell Investments global chief investment strategist Paul Eitelman said.

U.S. Treasury markets show investors are growing queasy about the damage higher-for-longer inflation could wreak on longer-dated debt, by eroding the real value of bonds' fixed-interest coupons over time.

Two-year Treasury yields, which track monetary policy bets, traded at 3.67% on Thursday, down from about 3.95% at the beginning of August.

But yields on 30-year Treasuries, which are the most sensitive to inflation expectations, are now 112 bps higher than the two-year notes, with the yield differential having risen from about 95bps on Aug. 1.

SOGGY DOLLAR

The U.S. dollar was struggling to make headway from a two-week low against a basket of major currencies on Thursday and Japan's yen made broad based gains, hitting its strongest in three weeks at 146.38 per dollar.

This came after Bessent said the Bank of Japan would raise interest rates because it was behind the curve in dealing inflation risks.

The BOJ has so far justified keeping borrowing costs ultra-low because its underlying inflation measure that focuses on domestic demand and wages is below its target and it wants more clarity on how U.S. tariffs will impact exporters.

The euro stood at $1,16722, nudging off the previous day's two-week high while European government debt largely tracked moves in Treasuries. Germany's 10 year yield was down 2 bps at 2.66%.

EYES ON UKRAINE

Commodities markets were subdued ahead of Friday's summit between U.S. President Donald Trump and his Russian counterpart Vladimir Putin.

Trump on Wednesday threatened "severe consequences" if Putin did not agree to peace in Ukraine and has also floated the idea of a second summit that would include Ukrainian President Volodymyr Zelenskiy.

Brent crude, the global oil marker, traded at around $65.86 a barrel on Thursday, just off a two-month low and down from almost $70 in early August. [O/R]

Spot gold prices, which tend to rise when investors focus on geopolitical risks, fell about 0.5% to $3,3925 per troy ounce.

Goldman Sachs analysts wrote in a note to clients that lack of progress towards a Ukraine ceasefire could lead to renewed White House sanctions on Russian oil but this would only cause a "limited risk" of supply disruptions.

J.P. Morgan strategists said a peace deal could lift the euro against the dollar but warned that the bar for achieving a ceasefire was high.