* MSCI ACWI advances, set for best first half since 1997
* Trump-Xi meeting at G20 in focus
* Dollar set for weakest month since start of 2018 (Updates with open of U.S. markets, changes byline, dateline; previous LONDON)
By Chuck Mikolajczak
NEW YORK, June 28 (Reuters) - Stocks posted modest gains on Friday and the dollar dipped ahead of a meeting on trade between U.S. President Donald Trump and Chinese President Xi Jinping, as global equities were poised to cap off their best first half since 1997.
Trump and Xi will meet during a Group of 20 summit this weekend in Osaka, Japan, for talks that could help resolve a year-long trade war between China and the United States, as signs of its dampening effect on global growth have become more prevalent.
Economic data on Friday showed U.S. consumer spending increased moderately in May and prices rose slightly, pointing to slowing economic growth and benign inflation pressures, which could give the Federal Reserve enough leeway to cut interest rates in July.
Wall Street opened with slight gains, although each of the major indexes were on pace to snap a three-week winning streak. The S&P 500 was set for its best June performance since 1955.
"It feels like the market has priced in the best possible outcome here," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"I continue to believe this is an asymmetrical risk – that the upside here is a couple percent the downside is a whole lot more than that if it falls apart."
The Dow Jones Industrial Average rose 30.17 points, or 0.11%, to 26,556.75, the S&P 500 gained 5.56 points, or 0.19%, to 2,930.48 and the Nasdaq Composite added 11.10 points, or 0.14%, to 7,978.86.
European indexes also moved higher ahead of the meeting, with Germany's trade-sensitive DAX leading the way with a gain of more than 1%.
The pan-European STOXX 600 index rose 0.54% and MSCI's gauge of stocks across the globe gained 0.23%.
MSCI's index was also set to break a three-week streak of gains but also on course for its best month since January, gaining more than 6% in June as equities rallied after major central banks around the globe pivoted towards easier monetary policy stances.
That shift came as trade negotiations between the United States and China broke down earlier this year. Now markets are betting on an interest rate cut by the U.S. Federal Reserve of at least a quarter of a percentage point, a virtual certainty as early as the next policy meeting in July, according to CME's FedWatch tool.
On Thursday, China's central bank pledged to support a slowing economy, before the release of data that is expected to show China's factory activity slowed for a second consecutive month in June.
Currency markets also reflected caution, as the Japanese yen crept higher to reverse a three-day losing streak against the dollar. The yen strengthened 0.02% versus the greenback at 107.78 per dollar.
The dollar index fell 0.17% against a basket of other currencies and set to turn in its weakest monthly performance since January 2018 as anticipation of a Fed rate cut has pushed the index down about 1.7% this month.
Benchmark 10-year notes last fell 1/32 in price to yield 2.0068%, from 2.005% late on Thursday.
Reporting by Chuck Mikolajczak Editing by Susan Thomas