By Vikram Subhedar
LONDON (Reuters) - World stocks, on their longest streak of monthly gains in more than a decade, rose on Tuesday amid further signs that the global economy is in fine fettle, while the beaten-down dollar edged up slightly from 14-month lows.
Softening U.S. inflation and incessant political turmoil has hit prospects of another Federal Reserve rate hike in coming months and sent the dollar down 10 percent from its January peaks.
The dollar's decline, low inflation and robust global growth has stoked appetite for stocks, however, with the MSCI ACWI extending its run after the index logged its longest streak of monthly gains since 2003-04 in July.
U.S. stock futures were up 0.3 percent.
In Europe, the main benchmark STOXX 600 was off to firm start to August after two months of mild losses.
"Data and market behaviour are consistent with our global reflation theme," strategists at Morgan Stanley, led by Hans Redeker, said in a note, pointing to strong Chinese factory data, corporate earnings and surging South Korean exports.
"The combination of USD weakness with decent, but not too strong, US economic growth works in favour of risk appetite, pushing financial conditions globally, and especially in the US, higher," said the strategists.
The dollar edged up slightly against major currencies although the outlook remained downbeat following the ouster of recently hired White House communications chief Anthony Scaramucci overnight.
"I think the short dollar trade is still the broad consensus trade in the financial markets,," said Esther Maria Reichelt, an FX analyst at Commerzbank in Frankfurt.
"But we are approaching important levels against other currencies, such as 1.20 on the euro, which may prompt some concerns from other central banks."
The euro is widely seen benefiting the most from the greenback's slide. It has risen 12 percent against the dollar this year, with most of the gains coming in the last three months, and is trading at its highest in more than two years.
Continued strength for the euro could take a toll on European corporate earnings, however, with roughly half the revenue of top regional firms generated outside the euro zone.
Bets on another quarter point U.S. rate increase have whittled down to around 47 percent compared to a 50 percent probability a month ago, according to CME's Fedwatch tool.
The index measuring the greenback's value against a basket of six major currencies fell to its lowest levels since May 2016 on Monday and was trading a shade above that at 92.92 on Tuesday.
In commodities, oil prices made further gains as falling U.S. inventories eased some concerns about oversupply. Futures on Brent crude and U.S. crude oil rose 0.2 percent and held comfortably above $50 a barrel for the first time since May.
(Reporting by Vikram Subhedar, Additional reporting by Saikat Chatterjee in LONDON and Hideyuki Sano in TOKYO; Editing by Raissa Kasolowsky)
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