GLOBAL MARKETS-Stocks stay close to record highs; dollar and bond yields turn higher

By Sinéad Carew and Iain Withers

NEW YORK/LONDON, Sept 12 (Reuters) - MSCI's global equities index stayed close to Thursday's record levels while U.S. Treasury yields rose on Friday after going into reverse in the prior session when expectations climbed for U.S. rate cuts.

The University of Michigan's Surveys of Consumers showed that U.S. consumer sentiment fell for a second straight month in September to its lowest point since May as consumers saw rising risks to business conditions, the labor market and inflation.

Consumer inflation expectations for the next year stayed at 4.8% but inflation expectations for the next five years rose to 3.9% from 3.5% last month.

"The University of Michigan sentiment study came in worse than expected and more importantly inflation expectations remained pretty high. That's sending yields a little higher," said Jack Ablin, founding partner and chief investment strategist at Cresset Capital.

"Investors worry that expectations dictate reality and perhaps consumers will act accordingly if they expect inflation to be higher than usual ... and just perpetuate the inflation hamster wheel."

Wall Street was a mixed bag after all three of its main indexes registered record closing highs on Thursday, when investors reacted bullishly to weaker-than-expected jobs data by ramping up bets that the Federal Reserve would make three rate cuts in a row, including a cut on September 17 after its meeting.

"The market feels a little stretched and toppy. And now investors in the market are going to focus on next Wednesday and exactly what Jay Powell says, how he says it. Does he sound more dovish? What lines did he delete? What lines did he add?," said Kenny Polcari, partner and chief market strategist at SlateStone Wealth in Jupiter, Florida, referring to Fed Chair Jerome Powell's press conference and the Fed's written statement.

"Rates are going lower for sure but I do think the market has gotten ahead of itself in terms of valuation."

Thursday's U.S. consumer price report had been seen as the last major hurdle before the Fed meeting. But while prices showed a bigger-than-expected increase, market participants kept their focus on a separate report that showed a sharp rise in unemployment claims.

On Wall Street at 02:52 p.m. the Dow Jones Industrial Average .DJI fell 149.75 points, or 0.32%, to 45,958.25, the S&P 500 .SPX rose 10.97 points, or 0.17%, to 6,598.44 and the Nasdaq Composite .IXIC rose 124.18 points, or 0.56%, to 22,167.06.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 2.19 points, or 0.23%, to 973.64 while the pan-European STOXX 600 .STOXX index closed down 0.09%, after giving up earlier gains.

In currencies, the U.S. dollar rose on Friday, a day after falling on a surge in U.S. jobless claims and modest inflation, as investors prepared for interest rate cuts after a roughly nine-month hiatus.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.01% to 97.56.

Against the Japanese yen JPY=, the dollar strengthened 0.18% to 147.47. U.S. and Japanese finance ministers on Friday released a statement reaffirming that neither country would target currency levels in their policies.

The euro EUR= was up 0.05% at $1.1739. On Thursday the European Central Bank had kept rates unchanged and signalled that it was in a "good place" on policy. After the meeting, ECB sources told Reuters the December meeting would be the most realistic time frame to debate whether another cut was needed to buffer the economy.

Britain's economy recorded zero monthly growth in July, in line with forecasts but showing a sharp drop in factory output, weighing on sterling GBP=, which weakened 0.04% to $1.3567.

In energy markets, oil prices settled higher after a Ukrainian drone attack on a Russian port suspended loadings, outweighing pressure from oversupply concerns and weaker U.S. demand risks.

U.S. crude CLc1 settled up 0.51% or 32 cents at $62.69 a barrel and Brent LCOc1 ended at $66.99 per barrel, up 0.93%, or 62 cents on the day.

In precious metals, gold was showing its fourth weekly gain in a row and trading close to its Tuesday record high, as investors looked ahead to U.S. rate cuts. GOL/

Spot gold XAU= rose 0.41% to $3,648.59 an ounce. It had hit a record high of $3,673.95 on Tuesday.