* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Oil prices near four-month low after steep sell off
* Bonds rally as softer U.S. data hardens rate cut bets
(Recasts, adds quote; updates prices)
NEW YORK/LONDON, Nov 17 (Reuters) - World stocks steadied near two-month peaks on Friday and Treasury yields briefly touched two-month lows as investors held fast to the belief that U.S. interest rates have peaked and might even fall next year.
But bets that rates could start falling got a reality check when Federal Reserve Bank of Boston President Susan Collins said on Friday while evidence is growing that inflation is easing,
she was not ready to rule out more rate hikes
should they be needed.
That put a damper on Wall Street. The Dow Jones Industrial Average and the S&P 500 were little changed by 1549 GMT, and the Nasdaq Composite lost 0.17%.
Despite sluggishness on Wall Street, MSCI's gauge of stocks across the globe added 0.20%, helped in part by European shares which rallied 1%.
In line with U.S. rate expectations, the dollar index fell 0.326%, and was on track for one of its steepest weekly declines this year. A falling dollar helped the yen to strengthen sharply to trade below 150 per dollar.
Oil prices rebounded from a four-month low, with U.S. crude jumping 2.9% and Brent climbing 3.05% on the day.
A softer tone to U.S. economic data this week has fueled rate-cuts bets, pushing Treasury yields down and lifting equity markets.
November so far has seen one of the strongest performances for stock markets this year, with MSCI's world stock index and the S&P 500 index both up more than 7%.
"We're still in this environment where we are late cycle and flirting with the idea of whether we go into a recession or not," said Justin Onuekwusi, chief investment officer at investment firm St. James's Place.
"This is the key reason why central bank expectations have become a key driver to risk and right now it's hard to look beyond near-term."
BOND BULLS OUT
Global bond markets were in a bullish mood.
The steep decline in U.S. Treasury yields since the start of November continued on Friday with the benchmark 10-year note yield briefly falling to a two-month low.
By midday, the benchmark 10-year note was up 1.4 basis points at 4.459%, from 4.445% late on Thursday, and 2-year note was last was up 5.4 basis points to yield 4.8962%, from 4.842%.
The gap widened between yields on two- and 10-year Treasury notes, an indicator of economic expectations. The curve inversion was at -44.0 basis points on Friday, compared with -38 basis points the day before, and remains near its deepest point since early October.
Rate-sensitive two-year bond yields in Germany and Britain fell to their lowest levels since June with money markets now pricing in roughly 100 basis points worth of rate cuts in the United States and the euro area.
In Asia, shares outside Japan eased 0.45%, while Japan's Nikkei closed up 0.48%, firming about 3% for the week, helped by the Bank of Japan's reassurance that it was sticking with its super loose policy.
Chinese blue chips fell 0.12%, having missed on the general rally so far this week.
Sentiment in Asia had been supported by the apparent easing of U.S.-China tensions, with the Chinese press lauding the meeting between President Xi Jinping and President Joe Biden.
Gold nudged up 0.2% to $1,984.74 an ounce.
(Reporting by Dhara Ranasinghe in London and Wayne Cole in Sydney; editing by Jane Merriman, Andrew Heavens and Richard Chang)
