February 16, 2018 / 5:18 PM / 7 months ago

GLOBAL MARKETS-Stocks set for best week in 6 years, dollar climbs

(Adds U.S. market open, byline, dateline; previous LONDON)

* Stocks continue week's big rally

* Euro zone, Treasury bond yields fall

* Crude rises on equity rally and weak dollar

By Herbert Lash

NEW YORK, Feb 16 (Reuters) - Global stocks rose on Friday and were set for their best week in six years as strong corporate earnings offset concerns about rising inflation and interest rates, while the U.S. dollar edged higher from a three-year low against major currencies.

U.S. Treasury prices rose as investors bought back bonds after a sell-off earlier in the week as investor jitters over rising inflation raised the possibility the Federal Reserve may hike interest rates at a faster pace than expected this year.

Analysts continued to underestimate the pace of global growth, which has led more companies to meet or beat analysts' result expectations than in any quarter in 20 years, according to calculations by Credit Suisse.

Fourth-quarter earnings for European companies in the STOXX 600 index are expected to increase 14.6 percent from a year ago, while the blended earnings growth estimate for the S&P 500 is 15 percent, Thomson Reuters I/B/E/S data show.

"Investors are getting comfortable with the idea that growth is sufficient enough to withstand the expected rate increases that we're going to get as well the increases in inflation that we've seen," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

MSCI's index of stock markets across the globe gained 0.54 percent, while the pan-European FTSEurofirst 300 index of leading regional shares rose 1.11 percent to a preliminary close of 1,491.90.

On Wall Street, the Dow Jones Industrial Average rose 140.69 points, or 0.56 percent, to 25,341.06. The S&P 500 gained 13.44 points, or 0.49 percent, to 2,744.64 and the Nasdaq Composite added 24.82 points, or 0.34 percent, to 7,281.25.

Both the S&P 500 and Dow indexes have gained 4.8 percent in the past four sessions, putting the S&P on track for its best week since January 2013 and the Dow's best since November 2016.

The Nasdaq's 6 percent gain since Monday has set it on course for its strongest week since December 2011.

Investors are trying to determine whether the market is in an overdue correction or the beginning of something worse, Arone said.

"It looks like this week they're comfortable about uncertainty and the risks that are associated with it and stocks are moving higher based on fundamentals," he said.

Borrowing costs across the euro area fell, though the prospect of higher inflation and a move toward tighter monetary policy from major central banks weighed on sentiment across world bond markets.

Short-dated bond yields in Germany, the euro zone's benchmark bond issuer, have risen by about 7 basis points this week and are set for their biggest weekly rise in eight weeks.

Benchmark 10-year U.S. Treasury notes rose 9/32 in price to push their yield down to 2.8604 percent.

The dollar rose on the day but remained on track to record its biggest weekly loss in nine months, as negative sentiment offset any support the greenback could take from higher Treasury yields.

The dollar index, tracking it against a basket of major currencies, rose 0.36 percent, with the euro down 0.5 percent to $1.2442. The Japanese yen strengthened 0.04 percent versus the greenback at 106.09 per dollar.

Oil prices rose slightly, as the rebound in the global equities market and the dollar's recent weakness supported their recovery from last week's slide.

U.S. West Texas Intermediate crude for March delivery rose 47 cents at $61.81 a barrel. Brent rose 75 cents to $65.08.

Reporting by Herbert Lash; Editing by Bernadette Baum

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