GLOBAL MARKETS-Global shares gain, tame US inflation boosts Fed rate cut hopes

By Sinéad Carew and Jaspreet Kalra

NEW YORK/MUMBAI, Sept 10 (Reuters) - MSCI's global stock index was advancing on Wednesday after hitting a record earlier with the dollar down slightly and Treasury yields hitting their lowest level since April after softer-than-expected U.S. inflation data boosted the outlook for Federal Reserve rate cuts.

Meanwhile geopolitical uncertainty boosted oil prices and kept gold near record highs following Israel's attack on Hamas leadership in Qatar on Tuesday, while Poland scrambled its own and NATO air defences to shoot down drones following a Russian air attack on western Ukraine.

On the data front, the U.S. Labor Department's Bureau of Labor Statistics said that the Producer Price Index (PPI) for final demand dipped 0.1% after a downwardly revised 0.7% jump in July.

In comparison, economists polled by Reuters had forecast a 0.3% PPI advance after a previously reported 0.9% surge in July. Services prices fell 0.2% while goods prices edged up 0.1% after increasing 0.6% in the prior month.

"Stocks and bonds clearly liked the PPI report. Inflation came in a bit tamer than many had expected," said Carol Schleif, Chief market strategist, BMO Private Wealth in Minneapolis. "This lends credence to the theme that the Fed should not only cut once next week. This increases the likelihood Fed should be able to cut more than once before year-end."

Traders see a 25 basis point in interest rate cut by the Fed next Wednesday as a sure thing, and even lay roughly 10% odds on a super-sized half percentage-point reduction, according to the CME Group's FedWatch Tool, which also shows bets for further cuts at both the October and December meetings.

The final potential hurdle to those expectations - consumer inflation data - comes out early on Thursday.

Schleif noted that markets could potentially lose some steam towards the end of the day as investors wait for the August Consumer Price Index reading.

Investors worried about the central bank's long-held independence were likely encouraged that a court ruling temporarily blocked President Donald Trump from removing Federal Reserve Governor Lisa Cook, a case which is likely to end up before the Supreme Court.

Stephen Miran, a top White House economic advisor, cleared a U.S. Senate hurdle on Wednesday, advancing his nomination as Federal Reserve governor.

On Wall Street, the S&P 500 and Nasdaq hit record highs after the PPI data. At 02:38 p.m. the Dow Jones Industrial Average .DJI fell 219.89 points, or 0.48%, to 45,491.45, the S&P 500 .SPX rose 15.54 points, or 0.24%, to 6,528.15 and the Nasdaq Composite .IXIC rose 4.36 points, or 0.02%, to 21,883.84.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 2.50 points, or 0.26%, to 964.20 after hitting a record high during Wednesday's session.

Earlier the pan-European STOXX 600 .STOXX index closed down 0.02% while Poland's blue-chip index .WIG20 fell about 0.9%, underperforming other regional European markets.

In currencies, the U.S. dollar was marginally down against the yen and euro after the producer prices data cemented expectations for Fed rate cuts.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.06% to 97.75, with the euro EUR= up 0.03% at $1.1709. Against the Japanese yen JPY=, the dollar weakened 0.08% to147.29.

In cryptocurrencies, bitcoin BTC= gained 1.85% to $113,558.32.

Key U.S. Treasury yields eased back after the data and fell further after an auction. The yield on benchmark U.S. 10-year notes US10YT=RR fell 4.2 basis points to 4.032%, from 4.074% late on Tuesday while the 30-year bond US30YT=RR yield fell 3.8 basis points to 4.6786%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.3 basis points to 3.529%, from 3.542% late on Tuesday.

In energy markets, oil prices rose after Israel's Qatar attack on Hamas leadership, while the U.S. made a push for new sanctions on buyers of Russian oil, but concerns over crude oversupply capped further gains.

U.S. crude CLc1 settled up 1.66%, or $1.04 at $63.67 a barrel and Brent LCOc1 ended at $67.49 per barrel, up 1.66%, or $1.10 on the day.

Gold XAU= kept close to its record high hit in the previous session supported by expectations for rate cuts following the softer-than-expected U.S. inflation data.

Spot gold XAU= rose 0.56% to $3,646.40 an ounce. U.S. gold futures GCc1 rose 0.29% to $3,653.90 an ounce.