GLOBAL MARKETS-US Treasury debt sinks on data, dollar gains

* US bond yields on track for biggest weekly rise in a year * US Treasury debt prices fall, oil and gold prices drop * US consumer sentiment rises in early December, dollar up * Peripheral European sovereign debt spreads widen (Updates with ECB comments and European markets' close)

By Daniel Bases

NEW YORK, Dec 10 (Reuters) - Upbeat U.S. consumer sentiment data on Friday pushed investors to sell off benchmark U.S. debt on expectations the economy will continue to grow, but U.S. stocks found little traction in the data.

Early strength in the U.S. dollar, which put downward pressure on commodity prices, eroded after comments from European Central Bank President Jean-Claude Trichet supported the euro.[ID:nLDE6B91G8]

The sell-off in U.S. Treasury debt caps off a week of relatively aggressive selling that has the benchmark 10-year note's yield on track for its biggest rise in this year.

"Yields are going to remain biased higher, but not in a straight line," said Kim Rupert, managing director of global fixed-income analysis at Action Economics in San Francisco.

Rupert also cited the rising U.S. deficit and inflation fears as well as a more robust outlook for economic growth as the reasons for the Treasury bond market's losses.

The benchmark U.S. 10-year Treasury note fell 21/32 of a point in price, driving the yield up to 3.288 percent.

Equity markets made gains globally but their upward move was mild. Contributing to the muted performance was a stronger greenback squeezing the operating margins for U.S. exporters, feeding into the recent inverse correlation between the currency and U.S. stocks.

In addition, China's central bank raised lenders' required reserves by 50 basis points, but left interest rates on hold. While this eased concerns that aggressive policy tightening could slow China's growth down too much, it did keep investors in check. [ID:nTOE6B907U]

European shares edged up to a fresh 26-month closing high.

"People are keeping an eye on economic numbers, but until they all start moving in the same direction across the board, traders are still going to be a bit jittery," said Manoj Ladwa, senior trader at ETX Capital.

The MSCI All-Country World stock index <.MIWD00000PUS> gained just 0.24 percent.

Peripheral European sovereign credit deteriorated on Friday as prices wax and wane while uncertainty remains over whether policymakers can put to rest the concerns the debt crisis is under control.

The euro fell 0.10 percent to $1.3229 . The U.S. Dollar Index <.DXY> , which measures the dollar against a basket of major trading partner currencies, gave up early gains to trade flat, up just 0.01 percent at 80.079. Against the yen, the greenback was up 0.29 percent at 83.92 yen .

Commodities priced in U.S. dollars weakened on the currency's gains. Spot gold prices fell $4.89 to $1,382.50 an ounce, while U.S. crude oil futures lost 86 cents, or 0.97 percent, to $87.51 a barrel.

STOCKS SCORE MODEST GAINS

U.S. data showed consumer sentiment rose more than expected in early December, according to the Thomson Reuters/University of Michigan survey, while import prices in November rose at their fastest pace in a year. In another report offering evidence of a firmer U.S. economic recovery, the government said the U.S. trade deficit narrowed much more than expected in October. For details, see [ID:nN10294524][ID:nN10198692]

Robert Tipp, chief investment strategist for Prudential Fixed Income in Newark, New Jersey, said the market is likely to be stuck in a range as sentiment vacillates between optimism and pessimism.

In midday trade, the Dow Jones industrial average <.DJI> rose 18.73 points, or 0.16 percent, to 11,388.79. The Standard & Poor's 500 Index <.SPX> gained 4.79 points, or 0.39 percent, to 1,237.79. The Nasdaq Composite Index <.IXIC> climbed 13.97 points, or 0.53 percent, to 2,630.64.

Shares of Netflix Inc jumped after Standard & Poor's said the movie rental company, along with F5 Networks Inc and Newfield Exploration Co , will replace Office Depot Inc , New York Times Co and Eastman Kodak Co in the S&P 500. Netflix was up 1.4 percent at $193.73.

The pan-European FTSEurofirst 300 index<.FTEU3> of top shares rose 0.16 percent to 1,125.59, its best close since September 2008, led by automakers and the U.S. consumer data.

Japan's benchmark Nikkei stock index <.N225> fell 0.7 percent to close on Friday at 10,211.95 due to profit-taking. But the Nikkei was up 0.3 percent for the week. [ID:nTOE6B906P]

In the credit markets, the premium that investors demand to hold peripheral government bonds rather than benchmark German debt rose on Friday with investors keeping to the sidelines as the European Central Bank's bond buying slowed down to a trickle.

The difference between Portuguese and German 10-year yields widened 18 basis points on the day to 346 bps with traders pointing to little buying interest from the ECB.

The equivalent yield spread for Irish debt widened to 540 bps, out 9 bps on the day. (Reporting and writing by Daniel Bases; Additional reporting by Julie Haviv, Leah Shnurr, Natsuko Waki, Ellen Freilich and William James; Editing by Jan Paschal)