GLOBAL MARKETS-Stocks surge on US inflation reading, upbeat earnings

Updates prices to late afternoon including oil settlement

By Sinéad Carew and Amanda Cooper

NEW YORK/LONDON, Jan 15 (Reuters) - A global equities gauge rallied on Wednesday while the dollar fell with Treasury yields after data showed core U.S. inflation rose less than expected in December, raising hopes that the Federal Reserve could ease rates further.

Oil prices rallied with support from a large draw in U.S. crude stockpiles and potential supply disruptions from new U.S. sanctions on Russia. But oil gains were limited as U.S. and Qatar said negotiators reached a deal to end the war in Gaza between Israel and Hamas, after 15 months of bloodshed that killed tens of thousands of Palestinians and inflamed.

Earlier, U.S. Bureau of Labor Statistics data showed the consumer price index (CPI) rose in line with expectations at an annual rate of 2.9% in December, from November's 2.7%.

But core inflation, which excludes food and energy prices, rose by 3.2%, which was below forecasts for 3.3%.

Investors were particularly encouraged by the latest inflation reading since data released on Tuesday showed that U.S. producer prices increased moderately in December.

"You have back-to-back readings of inflationary data that clearly suggest we're in maybe a little bit better shape than was being talked about," said Phil Blancato, chief market strategist at Osaic Wealth in New York.

"The market, which has been starving for some piece of good news really since after the election, has gotten something that's a bit of a shot in the arm here, putting some sugar back in the punch bowl," said Blancato, noting that earlier data and Fed comments had implied "inflation was turning sideways, if not heating up again."

After Wednesday's release, traders were pricing close-to-even odds the Fed would cut interest rates twice by the end of this year, with the first reduction to come in June.

Adding to Wednesday's upbeat tone were bumper fourth-quarter results from the likes of JPMorgan JPM.N, which reported its biggest annual profit on record, top asset manager BlackRock BLK.N, which logged a record $11.6 billion in assets, and Goldman Sachs GS.N, which saw its profit more than double in the final three months of 2024.

On Wall Street, at 03:03 p.m. the Dow Jones Industrial Average .DJI rose 779.84 points, or 1.83%, to 43,298.12, the S&P 500 .SPX rose 111.90 points, or 1.92%, to 5,954.81 and the Nasdaq Composite .IXIC rose 472.09 points, or 2.48%, to 19,516.48.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 13.32 points, or 1.60%, to 847.73. Earlier, Europe's STOXX 600 .STOXX equity index had finished up 1.33%.

The U.S. dollar lost ground against a basket of currencies after the data. Japan's yen was already boosted overnight, as traders priced in a 70% chance the Bank of Japan would raise interest rates in January after Governor Kazuo Ueda said policy-makers would discuss such an option next week. 0#JPYIRPR

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro,

fell 0.08% to 109.11.

The euro EUR= was down 0.16% at $1.0291 while against the Japanese yen JPY=, the dollar weakened 0.94% to 156.48.

After the peace deal, the dollar was down 0.41% against the Israeli shekel ILS= in active trading.

In fixed income, U.S. Treasury yields fell after the inflation data implied that a 2025 rate hike, which some investors had entertained, was off the table for now. When, or by how much, the Fed might cut was still up for debate, however.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 13.1 basis points to 4.657%, from 4.788% late on Tuesday. The 30-year bond US30YT=RR yield fell 10.2 basis points to 4.8827%.

The 2-year note US2YT=RR yield, which typically moves in step with Fed interest rate expectations, fell 9.7 basis points to 4.268%, from 4.365% late on Tuesday.

In energy markets, U.S. crude CLc1 settled up 3.28% at $80.04 a barrel and Brent LCOc1 settled at $82.03 per barrel, up 2.64% on the day.

Spot gold XAU= rose 0.6% to $2,693.28 an ounce. U.S. gold futures GCc1 rose 1.12% to $2,707.60 an ounce.

(Reporting by Sinéad Carew, Caroline Valetkevitch, Medha Singh, Amanda Cooper, graphic by Stephen Culp; Editing by Kirsten Donovan and Nick Zieminski)

((amanda.cooper@thomsonreuters.com; +442031978531; Bluesky: @acoops.bsky.social; sinead.carew@thomsonreuters.com; +13322191897;))