Updates after US PCE inflation data

By Harry Robertson

LONDON, July 26 (Reuters) -European shares and U.S. stock futures rebounded on Friday as markets stabilised after a week in which global equities have tumbled almost 2%, while the dollar regained ground against the yen.

There was little major reaction to data showing the U.S. personal consumption expenditures index, the Federal Reserve's preferred measure of inflation, cooled slightly to 2.5% year-on-year in June. Traders' bets on two or three Fed rate cuts this year remained intact.

S&P 500 futures ESc1 were up 0.72%, after the index .SPX fell for a third consecutive day on Thursday to mark a 1.9% drop for the week to date.

Futures for the tech-laden U.S. Nasdaq index NQcv1 - which has slumped 7% over the past two weeks - rose 1%.

Meanwhile, Europe's continent-wide STOXX 600 index .STOXX rose 0.58% and was on track to end the week 0.4% higher after losing 2.7% last week.

Equity markets - which had been trading at all time highs - have seen old favourites lose some allure and others pick up over the past two weeks after some cooler U.S. economic data sparked hopes that the Federal Reserve would soon be cutting rates.

Investors have snapped up smaller companies that are more closely tied to the economy and affected by borrowing costs. At the same time, they have ditched popular artificial intelligence plays such as Nvidia NVDA.O, helping to pull down global stocks .MIWD00000PUS by 1.7% this week.

"The way we can describe (this week) is an unwinding of consensus long positions in growth and AI stocks, and an unwinding of consensus long carry positions," said Max Kettner, chief multi-asset strategist at HSBC.

Analysts said the better performance of European stocks this week compared to their U.S peers was part of the rotation out of big tech names.

Other stock markets also found a footing on Friday, with Germany's DAX index .GDAXI up 0.46% and Britain's FTSE 100 .FTSE 1% higher.

Japan's Nikkei .N225 fell 0.53% overnight, while Hong Kong's Hang Seng .HSI edged up 0.1%.

U.S. 10-year Treasury yields US10YT=RR dipped slightly after the inflation print to 4.221%. Shorter-dated yields US2YT=RR, which are more sensitive to interest rate expectations, fell and were on track to end the week 10 basis points lower.

YEN SLIPS BACK

The Japanese yen, which has rallied around 1.8% this week, slipped from around a 12-week high as investors paused ahead of Bank of Japan and Federal Reserve interest rate decisions next Wednesday.

The dollar was last up 0.3% against the yen JPY= at 154.39.

Meanwhile, the index tracking the dollar against six other major currencies =USD was little changed at 104.36, while the euro EUR=EBS was very slightly higher at $1.0857.

The yen has been driven up by expectations the Fed could cut while Japan raises rates in the coming months, as well as by suspected BOJ intervention earlier this month.

The rally gathered steam this week as investors abandoned long-held bets against the yen, forcing them to buy back the Japanese currency.

Data on Thursday that showed the U.S. economy grew more than expected in the second quarter helped to calm the yen rally, although did little to change traders' bets on two or three Fed cuts this year, starting in September.

HSBC's Kettner said strong earnings reports from Amazon AMZN.O, Apple AAPL.O and Microsoft MSFT.O next week could stem the selling in stocks. "Markets could remain a bit nervous until then."

Oil prices slipped with the global benchmark Brent crude price LCOc1 down 0.67% at $81.82 a barrel.

Reporting by Harry Robertson in London; additional reporting by Kevin Buckland in Tokyo; Editing by Gareth Jones, Kirsten Donovan

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