U.S Treasury bonds and Wall Street stock futures rallied after U.S. inflation data came within expectations, soothing concerns of growing pressure on the Federal Reserve to raise interest rates more aggressively. The dollar held steady on news that consumer prices edged up 0.1 percent in January as energy prices fell for a second straight month. That compared with forecasts of a 0.2 percent rise, while core prices rose 0.2 percent, as expected. Markets had been braced for a flight from bonds had the CPI been above expectations, with nerves over mounting inflationary pressures stoked by last week's bigger-than-expected gain in core U.S. producer prices. U.S. stock index futures rallied from a flat position to indicating a firmer start on Wall Street, while European stock indexes cut losses of over 1 percent to around 0.7 percent. The dollar stood at $1.3202 against the euro, off 6-week lows of $1.3273, helped earlier by news that South Korea said long-term plans to diversify its $200 billion of foreign exchange reserves did not mean it would sell existing U.S. dollar holdings. U.S. Treasury yields dipped on the CPI data, with 10-year paper yielding 4.23 percent against 4.28 percent shortly before the numbers and 4.29 percent in New York. --More 1801 Local Time 1501 GMT
