By Chibuike Oguh

NEW YORK (Reuters) -Global equity markets rose while the U.S. dollar rebounded against major currencies on Friday as new data strengthened concerns about surging inflation and more heated economic activity from pent-up demand.

A U.S. Commerce Department report showed that consumer prices accelerated 3.1% in the year to April, blowing past the Federal Reserve’s 2% target and posting its largest annual gain since 1992.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, also rose at an 11.3% annualized rate in the first quarter, positioning the economy for strong growth as rising vaccinations eases COVID-19 pandemic’s grip.

The dollar index of major currencies rose 0.043% to 90.053 after making gains in early morning trading. The index is down 1.34% for the month.

The benchmark U.S. 10-year Treasury yield was lower at 1.5807% from 1.61% late on Thursday, compared with 1.6310% at the end of April.

“It’s another indication that we continue to see accelerating inflation remains a concern to many investors, but the markets are showing us that people are comfortable with it,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

MSCI’s broadest index of world stocks rose 0.31% to 711.15. It was up 1.4% for the month. European stocks gained 0.57% to 448.98 and 2.65% in May.

Investors have watched this week as multiple Federal Reserve officials came out to calm inflation jitters ahead of the release of Friday’s report and signal a possible start to talks about tapering stimulus.

On Thursday, the Fed’s vice chair for supervision, Randal Quarles, joined the chorus, saying he was “fully committed” to keeping monetary policy running at full throttle while jobs recover.

All major indexes were making gains on Wall Street in the early afternoon, led by technology, healthcare, real estate, and financial stocks.

The Dow Jones Industrial Average rose 0.19%, to 34,529.45, the S&P 500 gained 0.08%, at 4,204.11 and the Nasdaq Composite added 0.09%, at 13,748.74.

For the month, the Dow added 1.94%, the benchmark S&P 500 rose 0.55%, and the Nasdaq shed 1.53%.

Overnight in Asia, Tokyo’s Nikkei leapt more than 2%, ending the month 1.17% higher. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.46% on Friday and 0.3% for the month.

“The market is taking the Fed at its word for the time being, but if the numbers keep coming like this, that narrative will be challenged, as only scaling back asset purchases may not be enough,” said Brian Price, head of investment management at Commonwealth Financial Network in Boston.

Gold reversed rose above the key $1,900 level on Friday, after data showed rising U.S. consumer prices in April and boosted bullion’s appeal as an inflation hedge.

Spot gold rose 0.38% to $1,903.3383 per ounce, having earlier dipped as much as 0.8%. It has risen as much as 7.6% during the month.

Oil prices inched higher on Friday, with Brent holding near $70 a barrel as strong U.S. economic data and expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted.

Brent rose 0.27%, to settle at $69.65 a barrel, and U.S. West Texas Intermediate crude dropped 0.36%, to settle $66.61 a barrel. Brent and U.S. crude are up 3.57% and 4.31% respectively in May.

(Reporting by Chibuike Oguh in New York; editing by David Evans and Cynthia Osterman)