GLOBAL MARKETS-Stocks up with yields; US inflation, Ukraine optimism offset tariff fears

By Sinéad Carew

NEW YORK, March 12 (Reuters) - Global stocks rose on Wednesday with U.S. Treasury yields as relief over cooler U.S. inflation in February was countered by uncertainty around U.S. President Donald Trump's tariff policies and their potential impact on inflation and global growth.

Oil prices settled higher after data on slower stockpile builds, while the euro pulled back slightly after hitting a five-month high in the previous day's session on hopes for a ceasefire between Ukraine and Russia.

Wednesday's U.S. Department of Labor data showed the Consumer Price Index rose 2.8% on an annual basis in February, below the 2.9% forecast from economists polled by Reuters. On a monthly basis, it rose 0.2% after accelerating 0.5% in January and versus economists' estimate of 0.3%.

The S&P 500 .SPX opened higher but then lost steam in morning trading. It returned to positive territory before midday and stayed there for the rest of the session.

"It's maybe some liquidity coming back into the market," said Paul Christopher, head of global market investment strategy for Wells Fargo Investment Institute in St. Louis, Missouri.

"What we're seeing is some money coming back in buying the dip. That's a good sign."

While investors were relieved that inflation was lower than expectations, Christopher said that strength in services price increases also showed that the economy was still solid.

On Wall Street the Dow Jones Industrial Average .DJI fell 82.55 points, or 0.20%, to 41,350.93, the S&P 500 .SPX rose 27.23 points, or 0.49%, to 5,599.30 and the Nasdaq Composite .IXIC rose 212.36 points, or 1.22%, to 17,648.45.

But investors were still wary of U.S. trade policy and the impact that could have on inflation going forward.

"Today's inflation report is obviously good news but it's also backward-looking and doesn't tell us anything about where we're headed from here and what the inflationary impact of all these tariffs might be," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Investors had to scramble to keep up with events on Tuesday after Trump threatened to double steel and aluminium tariffs on Canada to 50%, then reversed course later in the day.

"The hard part is the uncertainty around tariffs," said Baird. "It's one thing to understand that the rules of the game are changing, but understanding what those rules will be and when they'll be clearly defined is another thing entirely."

Trump threatened on Wednesday to escalate a global trade war with further tariffs on European Union goods

This was after the European Commission said Europe would impose counter tariffs on 26 billion euros' ($28 billion) worth of U.S. goods, including dental floss, diamonds, bathrobes and bourbon. Europe's threat came after Trump's 25% tariffs on all steel and aluminium imports took effect on Wednesday.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 4.08 points, or 0.49%, to 830.72 after rising earlier to 834.73

The pan-European STOXX 600 .STOXX index earlier closed up 0.81% after four straight sessions of declines on optimism around a potential Ukraine-Russia ceasefire and some help from the cooler-than-expected U.S. inflation report.

In Treasuries, yields rose with the potentially inflationary impact of tariffs offseting optimism about cooling inflation.

“This is the last reading not impacted by tariff distortions, so to some extent the market's a little bit hesitant to over-react to a better print,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 2.8 basis points to 4.316%, from 4.288% late on Tuesday while

the 30-year bond US30YT=RR yield rose 3.2 basis points to 4.6355%.

The two-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 5 basis points to 3.991%, from 3.941% late on Tuesday.

With investor concerns mounting about recession and a global trade war, the yield spreads between corporate bonds and U.S. Treasuries widened late on Tuesday to their widest level since September.

In currencies, U.S. dollar performance was mixed due to counter currents of cooling inflation versus worries that tariffs could crank it up going forward.

The euro EUR= was down 0.25% at $1.0891 and against the Japanese yen JPY=, the dollar strengthened 0.38% to 148.33.

But the Canadian dollar CAD= strengthened 0.45% versus the greenback to C$1.44 per dollar and against the Swiss franc CHF=, the dollar weakened 0.08% to 0.882.

The Russian rouble reached a more than six-month high on Tuesday, but pulled back on Wednesday RUB=, weakening 1.75% against the greenback to 87.147 per dollar.

Oil prices rose as U.S. government data showed tighter oil and fuel inventories than expected, though investors kept an eye on mounting fears of a U.S. economic slowdown and the impact of tariffs on global economic growth.

U.S. crude CLc1 settled up 2.16% or $1.43 at $67.68 a barrel while Brent LCOc1 settled at $70.95 per barrel, after rising 2% or $1.39 on the day.

Safe-haven gold rose, aided by tariff uncertainty and the cooler U.S. inflation report.

Spot gold XAU= rose 0.53% to $2,931.59 an ounce. U.S. gold futures GCc1 rose 0.74% to $2,934.40 an ounce.

Elsewhere in metals, copper CMCU3 rose 1.31% to $9,789.00 a tonne while three-month aluminum on the London Metal Exchange CMAL3 fell 0.11% to $2,700.00 a tonne.