(Updates with open of U.S. markets; changes dateline to NEW YORK from LONDON)
* British PM fails to win over her party before Brexit vote
* U.S. consumer prices rise; underlying inflation slowing
* U.S. Treasury yields edge lower after inflation data
* Oil rises to $67 on cuts to Saudi, Venezuelan exports
By Saqib Iqbal Ahmed
NEW YORK, March 12 (Reuters) - World stock markets broadly climbed on Tuesday, along with U.S. shares, after data showed only a modest rise in core inflation in February, backing expectations the Federal Reserve will hold off from interest rate increases this year.
The tame inflation data weighed on the U.S. dollar, even as sterling came under pressure in choppy trading after Britain's Attorney General said the legal risks to Britain of the Brexit backstop deal remained unchanged despite assurances from the European Union.
MSCI's all-country stock index was 0.62 percent higher, its highest in nearly one week.
U.S. consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years.
"The Fed would appear to be justified in supporting the real economy by being patient and leaving interest rates on hold for a potentially extended period," Paul Ashworth, Chief U.S. Economist at Capital Economics said in a note.
The benchmark S&P 500 index and Nasdaq made modest gains following the benign inflation data.
"It doesn't require the Fed to raise rates and is very supportive of current stock prices," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
At 10:40 a.m. ET, the S&P 500 gained 12.23 points, or 0.44 percent, to 2,795.53 and the Nasdaq Composite added 29.82 points, or 0.39 percent, to 7,587.89.
The Dow Jones Industrial Average fell 4.21 points, or 0.02 percent, to 25,646.67, despite a second straight day of losses for Boeing shares amid safety concerns about the planemaker's best selling line of jets.
The pan-European STOXX 600 benchmark was 0.21 percent higher.
Britain's exit from the European Union hung in the balance on Tuesday after Prime Minister Theresa May's newly won assurances on her Brexit divorce deal failed to win over the main Brexit faction in her Conservative Party.
British lawmakers are due to vote on the Brexit deal at around 3:00 p.m. ET (1900 GMT).
In currency markets, the pound was slightly lower on the day in volatile trading.
The dollar pared gains again the Japanese yen and extended losses against the euro after U.S. consumer prices showed that inflation remains low despite a tight labor market, bolstering the Federal Reserve's case for keeping interest rates on hold.
The dollar index, which measures the greenback against a basket of six rivals, was 0.2 percent lower on the day.
The weaker dollar helped gold edge higher although rallying equities capped bullion's gains. Spot gold rose 0.3 percent to $1,297.8708 per ounce.
U.S. Treasury yields drifted lower after the inflation data.
U.S. long-dated yields fell in six of the last seven sessions, while those on two-year notes, the security most sensitive to interest rate moves, dropped in five of the last seven.
Oil rose to around $67 a barrel on Tuesday, supported by Saudi Arabia's plan for further voluntary supply curbs in April and a cut in oil exports from Venezuela due to a power outage.
"This shows Saudi Arabia's resolve to keep the oil market balanced by keeping oil supply tight," said Carsten Fritsch, an analyst at Commerzbank.
Brent crude, the global benchmark, rose by 0.59 cents to $67.17 a barrel. U.S. West Texas Intermediate crude added 0.71 cents to $57.5.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Medha Singh in Bengaluru and Henning Gloystein in Singapore; Editing by Bernadette Baum