Updates prices to U.S. morning trading

By Sinéad Carew and Tom Wilson

NEW YORK/ LONDON, June 10 (Reuters) - MSCI's global equities index pared earlier losses on Wednesday after economic data showed U.S. inflation was high but in line with expectations and oil prices rose as Iran and the United States exchanged strikes.

The dollar and U.S. Treasury yields were lower as U.S. consumer inflation rose at its fastest pace since April 2023. The Labor Department's Bureau of Labor Statistics reported a 4.2% increase in the Consumer Price Index in the 12 months through May.

Traders maintained bets that the Federal Reserve would hold rates steady after its June 17 meeting and priced in a nearly 43% probability of a 25-basis-point hike versus a 32% chance rates would stay unchanged by December, according to CME Group's FedWatch tool.

Steve Kolano, chief investment officer at Integrated Partners, said that the report "doesn’t do anything to reduce the probability of a possible rate hike at some point this year" with energy prices high and the Iran conflict still unresolved.

OIL PRICES RISE AGAIN

Oil prices rose again after U.S. President Donald Trump wrote in a social media post that Iran would "pay the price" after taking too long to negotiate and Tehran said it would reassess its diplomatic engagement with Washington after overnight tit-for-tat strikes.

Iran's Revolutionary Guards said they had carried out missile and drone attacks on U.S. military bases in Jordan, Kuwait and Bahrain in retaliation for American strikes on Iranian targets around the Strait of Hormuz, an energy conduit where oil transportation has been disrupted since the war began in late February.

The clashes marked one of the biggest outbreaks of hostilities since the two countries agreed to a ceasefire in April.

In energy markets, U.S. crude CLc1 rose 1.63% to $89.64 a barrel and Brent LCOc1 rose to $92.65 per barrel, up 1.31% on the day.

High oil prices are one of the prime drivers of inflation.

"Just because the inflation numbers came in consistent with expectations doesn’t mean they were good," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.

"The clock is ticking loudly to get the Strait of Hormuz open, either through force or through a truce. The Fed isn’t going to try to guess when that will happen, so President Trump needs to deliver them certainty before they meet."

MIXED PERFORMANCE ON WALL STREET

On Wall Street at 10:27 a.m. ET (1427 GMT), the Dow Jones Industrial Average .DJI fell 187.91 points, or 0.37%, to 50,684.20, the S&P 500 .SPX rose 2.58 points, or 0.03%, to 7,389.23 and the Nasdaq Composite .IXIC rose 5.46 points, or 0.04%, to 25,689.59.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 3.88 points, or 0.35%, to 1,099.54.

The pan-European STOXX 600 .STOXX index rose 0.2% after clawing its way back from earlier losses.

Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2.3%. The tech-heavy South Korean KOSPI .KS11 lost 4.5% as AI stocks came under pressure.

The CBOE volatility index .VIX, sometimes referred to as Wall Street's fear gauge, rose slightly on Wednesday to 20.43 but stayed below its Tuesday intraday peak, which was its highest level since April 7.

In currencies, the dollar index =USD, which measures the dollar against a basket of currencies including the yen and the euro, fell 0.18% to 99.83, with the euro EUR= up 0.13% at $1.1558.

Against the Japanese yen JPY=, the dollar strengthened 0.02% to 160.39, staying near the 160-level widely seen as the trigger for potential official intervention. Japan's wholesale inflation accelerated in May at the fastest pace in three years as price pressures from the war broadened, data showed on Wednesday, adding to the case for further interest rate hikes by the Bank of Japan.

In government bonds, the yield on benchmark U.S. 10-year notes US10YT=RR fell 0.7 basis points to 4.521%, from 4.528% late on Tuesday while the 30-year bond US30YT=RR yield fell 0.9 basis points to 5.0018%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.8 basis points to 4.116%, from 4.124% late on Tuesday.

Among precious metals, gold trading was choppy after the inflation data. Spot gold XAU= fell 2.26% to $4,166.09 an ounce. Spot silver XAG= fell 0.19% to $65.23 an ounce but U.S. silver futures SIc1 fell 2.07% to $63.75 an ounce.