Updates prices with U.S. markets close, oil settlement

By Chibuike Oguh and Naomi Rovnick

NEW YORK/LONDON Aug 30 (Reuters) -Global stocks edged higher in choppy trading on Friday, making it the fourth consecutive month of gains despite a bout of heavy selling in early August, buoyed by U.S. economic data that has helped the dollar snap a weeks-long losing streak.

The U.S. personal consumption expenditures (PCE) price index - which is the Federal Reserve's preferred inflation measure - rose 0.2% in July, according to Commerce Department data released on Friday.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month, the report showed. The data sets the stage for the Fed to likely begin easing monetary policy from September.

The Dow Jones Industrial Average .DJI finished up 0.55% to 41,563.08, reaching the second consecutive record high close. BenchmarkS&P 500 .SPX gained 1.01% to 5,648.40 and the Nasdaq Composite .IXIC gained 1.13% to 17,713.62. For the month, the Dow finished up 1.8%, S&P 500 added 2.3%, and the Nasdaq gained 0.6%.

Europe's Stoxx index .STOXX closed up 0.09% after touching a record intraday high while Britain's FTSE 100 .FTSE eased 0.04%. MSCI's world share index .MIWD00000PUS rose0.77%, making it a 2.40% monthly gain.

The stunning recovery from an early August sell-off reminiscent of October 1987's "Black Monday" came as traders priced a so-called Goldilocks scenario, in which the U.S. economy keeps growing but not so much as to prevent interest rate cuts.

Money markets are confidently pricing the Fed's first 25 basis point cut of this cycle at its September meeting, with a 33% chance of a jumbo 50 bp reduction.

The U.S. economy grew faster than initially thought in the second quarter of this year because of strong consumer spending, and corporate profits, a report on Thursday showed.

"The last few days we've started out a little stronger and then drifted during the day and in many cases closed either break even or slightly positive or slightly negative," said Tom Plumb, chief executive and portfolio manager at Plumb Funds.

"I think that is a sign of a cycle where you start to see people transition to a different environment and it's not positive for the past leaders," he added, referring to the so-called "Magnificent 7" tech stocks that were at the forefront of this year's stock market rally.

Government bonds rallied in early August after a weaker-than-expected U.S. jobs report and a surprise Bank of Japan rate hike wreaked chaos in currency carry trades and drove heavy selling of risky assets.

The yield on benchmark U.S. 10-year notes US10YT=RR, which moves inversely to prices, rose 4.2 basis points on Friday to 3.909%. The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, rose 2.4 basis points to 3.9165%.

"As we're starting to lay out what our expectations are for an environment with lower interest rates, at least lower short term rates... we're already starting to see a change in the shape of the yield curve, which impacts the bond market but also the stock market," Plumb added.

EURO FLAT

The dollar =USD steadied near a one-week high versus a basket of other major currencies, on track to snap a five-week losing streak although still heading for around a 2.5% monthly loss.

Against the yen JPY=EBS, the dollar stood at 146.14,set to lose more than 2.5%for the month, as pressure eased on the Japanese currency on the prospect of narrowing interest rate differentials.

Core inflation in Japan's capital Tokyo accelerated for a fourth straight month in August, data showed on Friday, with the 2.4% price increase signalling further BoJ rate hikes ahead.

The euro EUR=EBS was down 0.2% at $1.105, having declined on Thursday after softer-than-expected German inflation data increased bets on further European Central Bank rate cuts.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.48%and ended the month 2% higher. Japan's Nikkei .N225, following its early August collapse, was down 1.16% for the month after rising 0.74% on Friday.

Oil prices fell. Brent crude futures for October delivery LCOc1, which expire on Friday, settled 1.43% at $78.80 a barrel, marking a decline of 0.3% for the week and 2.4% for the month.

U.S. West Texas Intermediate crude CLc1 futures settled down 3.11% to $73.55, a drop of 1.7% in the week and a 3.6% decline in August.

Gold prices weakened but looking at a 2.8% monthly gain. Spot gold XAU= lost 0.74% to $2,502.44 an ounce. U.S. gold futures GCcv1 settled 1.3% lower at $2,527.6 GOL/

Reporting by Chibuike Oguh in New York and Naomi Rovnick in London; Editing by Kirsten Donovan and Aurora Ellis

To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA