* Stocks jump on growing expectations of central bank stimulus
* Dollar gains on U.S. housing data, euro's decline
* German bond yields bounce off lows after budget report
* Oil edges higher on stock market gains
* Growing hopes of stimulus from central banks
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, Aug 16 (Reuters) - The dollar strengthened while U.S. and European stocks surged on Friday amid growing expectations the European Central Bank will cut interest rates to stimulate the economy and after China said it plans to boost disposable income to spur consumption.
Benchmark U.S. Treasury yields rose from three-year lows but government bond yields in the euro area hovered near record lows on heightened expectations of aggressive ECB easing soon to address growing concerns about recession risks.
The dollar hit a two-week high against the euro as expectations of ECB stimulus weighed on the single currency while bullish data showing a jump in U.S. homebuilding permits to a seven-month high also helped lift the greenback. euro pared some losses after Der Spiegel reported Germany's right-left coalition government would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession. government bond yields rebounded sharply but later pared some of the gains. The Finance Ministry declined to comment on Spiegel's report. rebound in equity markets buoyed investor sentiment, though it is hard to say the recent rout has found a floor despite cheaper prices, said Yousef Abbasi, global market strategist at INTL-FCStone Financial in New York.
U.S. banks are likely to get cheaper because European banks are likely to do so if the ECB doesn't put together a credible off-set plan for further negative rates for banks, he said.
"That's the concern. Despite some equities looking attractive the macro concern is giving investors a reason to pause and not so aggressively buy the dip," Abbasi said.
MSCI's gauge of stock performance in 47 countries .MIWD00000PUS gained 1.21% and its emerging market .MSCIEF rose 0.73%. In Europe, the FTSEurofirst 300 .FTEU3 index of leading regional shares jumped 1.22%.
The Dow Jones Industrial Average .DJI rose 315.64 points, or 1.23%, to 25,895.03, the S&P 500 .SPX gained 42.1 points, or 1.48%, to 2,889.7 and the Nasdaq Composite .IXIC added 133.39 points, or 1.72%, to 7,900.01. euro earlier slid to $1.1090 EUR= , shy of a two-year low it set two weeks ago, on reports the ECB's Olli Rehn had suggested Thursday that a significant easing package was needed in September. dollar index .DXY rose 0.04%, with the euro EUR= down 0.09% to $1.1096. The Japanese yen JPY= weakened 0.21% versus the greenback at 106.36 per dollar.
The German bund was set for a fifth straight week of declines, Italy's 10-year bond yield was poised for its biggest weekly fall since mid-2018 and Spanish 10-year yields were on track for their biggest weekly fall since 2016 ES10YT=RR .
The benchmark 10-year U.S. Treasury notes US10YT=RR fell 14/32 in price to push yields up to 1.5741%. oil prices recovered from two days of declines after data on Thursday, showing a rise in U.S. retail sales, helped ease recession concerns. A bearish outlook from OPEC capped gains. crude LCOc1 rose 42 cents at $58.65 a barrel while U.S. crude CLc1 traded break-even at $54.47 a barrel.
http://tmsnrt.rs/2jvdmXl GRAPHIC-World FX rates in 2019