World stocks rally on upbeat Wall St earnings; oil, govt bond yields up

* Dollar near three-year high vs yen

* US stocks rise again after Goldman reports solid Q3 profits

* FTSE 100 recovers all ground lost in pandemic

* Oil prices back near multi-year highs

* Bitcoin tops $60,000

* Worries about China growth simmer

By Koh Gui Qing

NEW YORK, Oct 15 (Reuters) - Stocks rallied globally on Friday after a run of strong U.S. corporate earnings reports fuelled optimism about the economy, though three-year-high oil prices kept inflation risks alive and supported government bond yields.

U.S. investment bank Goldman Sachs Group Inc GS.N was the latest on Wall Street to trounce market expectations when it reported a 66% surge in third-quarter profit, thanks to a record wave of investment banking activity.

Though some analysts warned investors against complacency so early in the earnings season, U.S. stocks joined Friday's rally in global equities nonetheless.

The Dow Jones Industrial Average .DJI rose 0.81%, the S&P 500 .SPX gained 0.63% and the Nasdaq Composite .IXIC added 0.41%.

The pan-European STOXX 600 index .STOXX rose 0.74% and MSCI's gauge of stocks across the globe .MIWD00000PUS climbed 0.78%.

"We are clearly off to a good start of the third-quarter earnings season, but have miles to go before we sleep," said Arthur Hogan, chief market strategist at National Securities Corp. He noted that only 35 of the S&P 500 companies have reported their earnings.

Unperturbed by news of a fatal stabbing of a British lawmaker on Friday, Britain's FTSE 100 .FSTE climbed 0.37% to hit a near 20-month high. The UK blue-chip index has now recovered all ground lost since the coronavirus pandemic began in March last year.

Soaring oil prices, which have fed investor concerns about their impact on businesses, also appeared to take a backseat.

Forecasts of a supply deficit over the next few months as demand rises on the back of relaxed travel restrictions drove oil prices to a three-year high of above $85 a barrel.

U.S. crude CLc1 recently rose 0.79% to $81.95 per barrel and Brent LCOc1 was at $84.52, up 0.62%, after hitting a high of $85.10.

Bets that rising prices are likely to prompt central banks to raise interest rates sooner than expected lifted government bond yields, though gains were more pronounced in the United States than in Europe.

The yield on two-year U.S. Treasuries US2YT=RR , which reflect short-term rate expectations, climbed to 0.3788%, from Thursday's 0.354%.

In Europe, 10-year Bund yields slipped after notching seven straight weeks of gains on signs of rising inflationary pressure and robust economic growth.

The dollar, which has been bolstered by bets that the accelerating inflation could prompt the Federal Reserve to raise interest rates sooner than expected, touched a three-year high against the yen JPY= . One dollar bought 114.46 yen, the most since late 2018.

The dollar index =USD , which measures the greenback against a basket of other currencies, was marginally lower on the day, slipping 0.04%, and set for its first weekly decline versus major peers since the start of last month, having lost a little ground to sterling GBP=D3 and the euro EUR= .

Gold prices took a breather on Friday after having their best day in seven months the previous day. Spot gold XAU= dropped 1.5% to $1,768.32 an ounce. U.S. gold futures GCc1 fell 1.37% to $1,772.00 an ounce.

The return of optimism will be tested by next week's anticipated weaker growth data from China, and the impact of strengthening oil prices on consumers going into the winter months, said Mike Hewson, chief markets analyst at CMC Markets.

European car registrations slumped by more than a quarter in September, and Toyota Motor Corp 7203.T said it would cut global output in November as chip shortages and supply chain problems continued to dog the sector.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 1.35%, rising 2.1% for the week in its best weekly performance since late June, while Japan's Nikkei surged 1.81%, led by tech stocks.

Analysts largely attributed the gains in Asia to the U.S. rally.

Chinese shares rose more cautiously than elsewhere with blue chips .CSI300 up 0.38% ahead of next week's growth figures.

A Chinese central bank official said on Friday that the spillover effect of China Evergrande Group's debt problems on the banking system is controllable, in rare official remarks on the liquidity crisis at China's No. 2 developer that has roiled markets.

Bitcoin BTC=BTSP hit a six-month high of $60,000 on Friday, approaching the record hit in April, as traders became increasingly confident U.S. regulators would approve the launch of an exchange-traded fund based on its futures contracts.

World FX rates YTD Link
Global asset performance Link
Asian stock markets Link
Fund flows into global equities bonds and money markets Link
Bitcoin on the rise Link

Reporting by Huw Jones, additional reporting by Alun John;
Editing by Kirsten Donovan, Steve Orlofsky and Susan Fenton

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