* Oil eases as focus returns to oversupply
* Dollar heads for third week of gains
* Gold poised for biggest weekly drop in 8 weeks
By Herbert Lash
NEW YORK, May 20 (Reuters) - Global equity markets rose on
Friday as investors took in stride the possibility the Federal
Reserve might hike interest rates in June, a notion that helped
U.S. bond yields to rise and lifted the dollar to a third
straight week of gains.
U.S. home resales rose more than expected in April,
suggesting the American economy continues to gather pace during
the second quarter. The data added to a growing perception the
U.S. economy can withstand a rate hike next month or in July.
Wall Street was higher, following gains in Europe, with the
S&P financial sector index .SPSY rising 0.8 percent as recent
comments from Fed officials suggested the possibility of a rate
increase as early as June.
New York Fed President William Dudley said on Thursday the
U.S. economy was strong enough to warrant a hike.
MSCI's all-country world stock index .MIWD00000PUS rose
0.84 percent and the pan-European FTSEurofirst 300 index
.FTEU3 of leading regional stocks closed up 1.26 percent to
1,326.45 points.
On Wall Street, the Dow Jones industrial average .DJI rose
108.93 points, or 0.62 percent, to 17,544.33. The S&P 500 .SPX
gained 15.66 points, or 0.77 percent, to 2,055.7 and the Nasdaq
Composite .IXIC added 65.20 points, or 1.38 percent, to
4,777.73.
The dollar traded close to two-month highs after it pushed
past $1.12 per euro for the first time since March. Sterling was
set for its strongest week against the euro since October as
fears abated that Britain would vote to leave the European Union
next month in what is referred to as "Brexit." EURGBP= GBP=
"The question for traders now is whether this Fed rate hike
issue is a 'risk-on' or a 'risk-off' situation," said Saxo Bank
FX strategist John Hardy.
"Our interpretation is that they want to do a June move,
especially now Brexit chances seem to have dropped right off."
Not everyone believes a rate hike is imminent.
The probability of a June rate hike has jumped to 30 percent
from around 4 percent at the start of the week, according to CME
Group's FedWatch site. Futures markets are predicting two rate
hikes this year as opposed to just one as recently as last week.
"There is not enough data suggesting a rate hike is
warranted," said Rahul Shah, chief executive of Ideal Asset
Management, adding that equity gains were a relief rally.
The dollar index .DXY was slightly higher at 95.397 after
reaching 95.502 overnight, a level last seen on March 29.
Against the yen, the dollar gained 0.48 percent to set
another three-week high of 110.58 yen JPY= . The euro EUR=
rose 0.07 percent against the dollar at $1.1210.
Japan and the United States remain at loggerheads over
exchange-rate policy with Washington dismissing Tokyo's concerns
that recent yen rises are excessive. Currency market stability
is among topics financial leaders of the G7 advanced economies
are discussing at a two-day gathering that kicked off
Friday.
A stronger dollar spurred investors to cash in on a second
week of oil price gains, with the focus remaining on the
market's rebalancing as the global glut faced unplanned supply
outages.
Global benchmark Brent crude prices LCOc1 slipped 8 cents
higher at $48.73 a barrel.
U.S. West Texas Intermediate (WTI) crude futures CLc1
traded down 30 cents at $47.86 a barrel.
U.S. Treasury yields, which move in the opposite direction
of prices, rose to their highest in about two months.
Benchmark U.S. 10-year notes US10YT=RR fell 1/32 in price,
pushing their yield up to 1.8488 percent. Earlier yields hit
1.868 percent.
Gold edged higher after two days of losses but remained on
track for its biggest weekly slide in nearly two months on
growing expectations of a U.S. rate increase.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global assets in 2016 http://reut.rs/1WAiOSC
Currencies in 2016 http://link.reuters.com/tak27s
Commodities performance http://link.reuters.com/reb25t
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Bernadette Baum and Nick Zieminski)