Global stocks rise, dollar falls as odds wane for near-term rate hike

By Dion Rabouin

NEW YORK (Reuters) - An index of global stocks edged higher on Monday, as did Wall Street, which was bolstered by a softer dollar as weak U.S. economic data cut expectations of a near-term interest rate increase by the Federal Reserve.

With share markets in Europe, as well as those in Australia, New Zealand and Hong Kong closed for holidays following last week's Good Friday holiday, trading was generally light for much of the day.

The dollar reversed early gains and moved lower after U.S. consumer spending data missed expectations. Soft readings for personal income and inflation indicated a sluggish economy with weak first-quarter gross domestic product growth.

Following Monday's data, markets are pricing in about a 37 percent chance of a rate hike by the Fed in June, with only a 10 percent chance of an April increase, according to CME Group's FedWatch tool.

Markets had previously priced in a 50 percent chance of the Fed raising rates in June.

"Because we had softer (personal consumption expenditures) data and also the big downward revision in spending in January, that is causing a lot of the (dollar) long trades that many have put on to be cut back," said Kathy Lien, managing director at BK Asset Management in New York.

"Today's report certainly raises the question of whether the Fed can pull the trigger in June."

The dollar benefited last week from stronger-than-expected economic data and comments from some Fed officials indicating that policymakers think they could raise interest rates as early as next month.

Higher interest rates boost the dollar, making it more attractive to investors. But a strong dollar can weigh on the returns of firms that do business overseas, hurting earnings.

The dollar index, which measures the greenback against a basket of six major currencies (.DXY), dipped 0.2 percent to 95.950. It had risen to as much as 96.339 prior to the data, the highest in almost two weeks.

The weak dollar benefited U.S. stocks, which rose in light trading, led by the materials and consumer discretionary sectors, as utilities and energy dragged.

"You've got that kind of imbalance mismatch of a little catch-up going on from Friday's domestic market and ... an absence of significant players from Europe today," said Hugh Anderson, managing director at HighTower Advisors in Las Vegas.

The Dow Jones industrial average (.DJI) rose 19.66 points, or 0.11 percent, to 17,535.39, the S&P 500 (.SPX) gained 1.11 points, or 0.05 percent, to 2,037.05 and the Nasdaq Composite (.IXIC) dropped 6.72 points, or 0.14 percent, to 4,766.79.

MSCI's measure of emerging market stocks (.MSCIEF) edged up 0.09 percent. It was supported by Brazil's Bovespa Index, which gained 2.5 percent on prospects that the biggest party in the government coalition was about to defect, weakening President Dilma Rousseff's defense against impeachment proceedings in Congress.

MSCI's index of world shares (.MIWD00000PUS) gained 0.2 percent.

Bond prices rose in the wake of the U.S. data, with yields on benchmark U.S. 10-year Treasuries falling to 1.8684 percent.

Oil prices, which have risen about 50 percent since multi-year lows hit in January, turned lower in thin trading.

U.S. crude futures fell 0.2 percent to $39.39 per barrel, and Brent lost 0.45 percent to $40.26.

(Reporting by Dion Rabouin; Editing by Alan Crosby and Dan Grebler)