Updates prices and data

By Naomi Rovnick and Rae Wee

LONDON SINGAPORE, Aug 16 (Reuters) -Global stocks headed for their best week since November 2023 after encouraging U.S. economic data soothed fears of an imminent recession, in a rapid shift from a rout last week that kept investors wary of a bumpy ride ahead.

MSCI's main world stock index .MIWO00000PUS hurtled towards an almost 4% gain over five trading days, recovering strongly from market turmoil last week generated by U.S. recession fears and foreign exchange gyrations.

Europe's STOXX share index .STOXX rose moderately in early dealings on Friday and headed for a 2.3% weekly rise, with Asian shares outside Japan notching up similar gains and U.S. stock futures heralding a blockbuster week for Wall Street.

The VIX .VIX U.S. stock volatility index, broadly considered the market's fear gauge, sat at benign levels of about 15 after hitting a four-year high of 65 early last week.

The sharp turnaround in market sentiment came after a batch of U.S. data this week showed inflation was moderating but retail spending was robust.

That has helped the market narrative move away from recession concerns, sparked by a weak U.S. jobs report in early August, to confidence the economy can keep growing as price pressures ease. Softer inflation data has reinforced expectations of a Fed rate cut in September.

This so-called soft landing scenario may not hold, Aviva Investors multi-asset portfolio manager Sotirios Nakos cautioned, who suspected markets could keep swinging with every new economic data point.

"The market went very quickly to price more negative data and now what we're primarily seeing is the rapid unwinding of that," he said.

"I do not think a lot of money has participated in this bounceback," he added, noting that thin summer trading conditions in August would have exacerbated market moves.

S&P 500 futures ESc1 rose 0.12% to put the blue chip share index on course for an almost 4% weekly gain. Contracts tracking the tech-heavy Nasdaq 100 NQc1 also rose.

Markets expect the U.S. Federal Reserve to lower borrowing costs from a 23-year high next month but have reduced their bets of an emergency 50-basis-point cut to 25% from 55% a week ago, the CME FedWatch tool showed.

"The totality of data tells us disinflation is continuing and the Fed is almost certain to cut rates in September by 25 bps," said David Chao, Invesco's global market strategist for Asia Pacific ex-Japan.

"But I do believe that the July inflation report diminishes the chances of a super-size cut."

In Asia on Friday, Japan's Topix .TOPX jumped nearly 3% and Hong Kong's Hang Seng Index .HSI rose 1.8%.

The Topix was poised for a weekly gain of almost 8%, its best performance since March 2020, following heavy losses last week after a surprise Bank of Japan rate cut sent the yen soaring against the dollar, wrecking yen-funded stock trades.

The Japanese currency eased to 148.96 per dollar JPY=EBS, on Friday, languishing near a two-week low of 149.40 hit in the previous session and some distance away from last week's seven-month peak.

Elsewherein currency markets, the Swiss franc CHF=EBS, which also surged last week on the back of a flight to safe-haven assets, looked set to lose about 0.7% for the week.

The euroEUR=EBS struggled to break above the level of $1.10 against a firmer dollar, which was buoyed by Thursday's retail sales report.

Government bond trading was lacklustre, meanwhile, as a return to confidence sapped demand for safe-haven government debt securities.

The two-year U.S. Treasury yield US2YT=RR, which rises as the price of the debt falls and tracks interest rate expectations, hovered near its highest in more than a week, tolast stand at about 4.087%. The benchmark 10-year yield US10YT=RR, which influences debt pricing worldwide, was 2 basis points (bps) lower at 3.907%. US/

Germany's equivalent bund yield DE10YT=RR was steady at 2.252%.

Brent crude futures LCOc1 dipped 0.3% to $80.82 per barrel on Friday while U.S. West Texas Intermediate crude futures CLc1 eased 0.4% to $77.84 a barrel. Both benchmarks also headed towards weekly rises of more than 1%. O/R

Spot gold XAU= rose 0.3% to $2,462 an ounce. GOL/

Editing by Shri Navaratnam, Clarence Fernandez and Ana Nicolaci da Costa

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