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GLOBAL MARKETS-Stimulus supports stocks, oil heads higher

Saqib Iqbal Ahmed

* MSCI world equity index up

* Central bank easing helps sentiment

* Treasury yields steady as funding pressures ease

* Oil up on day, poised for biggest weekly jump since January (Updates throughout with open of U.S. markets, changes dateline; previous LONDON)

NEW YORK, Sept 20 (Reuters) - An index of global stock markets edged higher on Friday as stimulus measures by major central banks eased worries about growth, especially in Asian markets, while oil headed for its best week since January.

China cut a key lending rate for the second straight month on Friday, becoming the third major central bank to cut interest rates in recent days, after the European Central Bank and the U.S. Federal Reserve.

Equity markets have largely welcomed the central bank moves, although most of the cuts was already priced in and worries about a possible global slowdown still linger.

The MSCI world equity index, which tracks shares in 47 countries, was 0.14% higher.

U.S. stocks edged higher as the interest rate cut by China's central bank boosted investor sentiment and signs of co-operation on trade between the world's two largest economies allayed concerns about a slowdown in global growth.

On Thursday, the U.S. Trade Representative's office said dozens more Chinese products would be excluded from existing tariffs.

For the week, the S&P 500 and the Nasdaq were set to end marginally higher.

"The market does seem to be in a bit of a waiting pattern, looking for indication for whether the economy will gain strength or the alternative indication that we are going to slow further," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The Dow Jones Industrial Average rose 65.77 points, or 0.24%, to 27,160.56, the S&P 500 gained 4.93 points, or 0.16%, to 3,011.72 and the Nasdaq Composite added 2.08 points, or 0.03%, to 8,184.96.

The pan-European STOXX 600 index rose 0.35%, with defensive and retail stocks leading gains.

U.S. Treasury yields were steady as the New York Federal Reserve conducted another repo operation to ease conditions in the short-term lending markets, and as investors continued to evaluate whether further interest rate cuts this year are likely.

The average interest rate banks charge each other to borrow reserves overnight on Thursday fell below the upper-end of the Federal Reserve's target range for the first time this week, as the Fed flooded billions in cash into the banking system to address turmoil in money markets.

Benchmark 10-year notes were last up 1/32 in price to yield 1.772%, down from 1.774% on Thursday.

In foreign exchange markets, the dollar rose against a basket of currencies, putting it on track for its first weekly increase in three, prompted by signs of progress on U.S.-China trade talks and hopes that the Federal Reserve would not lower rates aggressively.

The dollar index was up 0.32%.

Oil prices were up modestly on Friday, putting them on track for their biggest weekly jump since January, lifted by rising Middle East tensions after a key Saudi Arabian supply hub was knocked out by an attack last weekend.

"Investors should probably assume that oil stabilizes for now in the $60-65 per barrel range, though the risk is to the upside," said Jefferies analyst Christopher Wood.

U.S. crude rose 0.91% to $58.66 per barrel and Brent was last at $64.75, up 0.54% on the day.

Lingering tensions in the Middle East helped support gold prices and the yellow metal was on pace for its first weekly rise in four. Spot gold was up 0.3% at $1,503.4946 an ounce.

Palladium, which is in short supply, hit a record peak helped by demand driven by car producers and speculators.

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Ambar Warrick and Medha Singh in Bengaluru, Julia Payne in London, Florence Tan in Singapore)