GLOBAL MARKETS-Stocks rise, US Treasury yields drop after inflation data

Updates to afternoon U.S. trading

By Chuck Mikolajczak

NEW YORK, Feb 13 (Reuters) - A gauge of global stocks climbed on Thursday for the first time in three sessions while U.S. Treasury yields tumbled as an inflation reading fueled hopes the Federal Reserve's preferred measure of prices might be cooler than anticipated.

The Labor Department said the producer price index (PPI) for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, topping the estimate of economists polled by Reuters for a 0.3% rise.

The data comes on the heels of Wednesday's consumer price index (CPI), which showed its largest acceleration in nearly 1-1/2 years.

But components of the PPI data that are part of the personal consumption expenditures (PCE), which Fed Chair Jerome Powell said on Wednesday is the Fed's preferred targeted inflation measure, were soft and added to hopes the PCE reading may be cooler than currently expected.

"It looks like core PCE will come out at around 0.3%, which is still high, whereas in January of last year, it was 0.5%. If that forecast is correct, core PCE is going to fall from 2.8% to 2.6% year over year," said Chris Diaz, co-head of fixed income at Brown Advisory in Chicago.

"There's going to be enough downward pressure in the shelter component and wages that will continue to put downward pressure on inflation."

On Wall Street, U.S. stocks were higher after the inflation data, with the Nasdaq up more than 1%. Materials .SPLRCM led all S&P sectors higher.

Consumer discretionary stocks .SPLRCD also advanced, boosted by a rise of about 5% in Tesla TSLA.O and a surge of almost 17% in MGM Resorts MGM.N after the casino operator reported better than expected quarterly earnings.

The Dow Jones Industrial Average .DJI rose 343.48 points, or 0.77%, to 44,712.04, the S&P 500 .SPX rose 52.00 points, or 0.86%, to 6,103.96 and the Nasdaq Composite .IXIC rose 235.87 points, or 1.20%, to 19,885.82.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 8.61 points, or 0.99%, to 881.39 and was on track for its biggest daily percentage gain since January 15.

The pan-European STOXX 600 .STOXX index rose 1.09% for a fourth straight session to close at a record, buoyed by gains in Nestle NESN.S and Siemens SIEGn.DE after their quarterly results, as well as hopes for talks to end the war between Russia and Ukraine.

U.S. President Donald Trump said on Wednesday that both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy expressed a desire for peace in separate phone calls with him on Wednesday, and Trump ordered top U.S. officials to begin talks on ending the war.

The yield on benchmark U.S. 10-year notes US10YT=RR tumbled 11.3 basis points to 4.521%, on track for its biggest daily drop in a month. Aside from the PPI data, U.S. initial jobless claims fell 7,000 to a seasonally adjusted 213,000, slightly below the 215,000 level and indicating the job market remains on stable footing.

Still, expectations for a rate cut from the Fed continue to be pushed back this year, with the market not pricing in a chance of more than 50% for a cut of at least 25 basis points until September, according to CME's FedWatch Tool .

The dollar index =USD, which measures the greenback against a basket of currencies, fell 0.52% to 107.35 and was on track for its biggest one-day percentage drop since January 24, with the euro EUR= up 0.48% at $1.0432.

Croatian policymaker Boris Vujcic said the European Central Bank could cut interest rates three more times this year even if its U.S. counterpart moves more slowly, but policy easing would be predicated on a rapid fall in underlying inflation.

Against the Japanese yen JPY=, the dollar weakened 0.92% to 152.99.

Sterling GBP= strengthened 0.68% to $1.2527. Britain's economy unexpectedly grew by 0.1% in the final quarter of last year, official figures showed, topping the estimate envisaging a contraction of 0.1%, though longer-term challenges remain.

Oil prices were slightly lower, rebounding from earlier declines as downward pressure from hopes for peace talks between Russia and Ukraine were offset by optimism for a pause in new U.S. tariffs. U.S. crude CLc1 settled down 0.11% to $71.29 a barrel and Brent LCOc1 fell to settle at $75.02 per barrel, down 0.21% on the day.