* Markets put positive spin on startlingly weak US growth data
* Outlook for low US rates benefits stocks, longer-term bonds
* Dollar loses ground, gives commodities a lift
* Caution needed ahead of US inflation data pivotal for Fed
By Wayne Cole
SYDNEY, June 26 (Reuters) - Asian shares swung higher on Thursday as weak U.S. growth seemed to further delay the day when interest rates might rise, prompting investors to plough funds into riskier assets in a desperate search for returns.
A shockingly poor reading on the U.S. economy for the first quarter also pressured the dollar while giving a lift to most commodities and resource-related currencies.
Longer-dated bonds benefited as funds were forced to move out the yield curve, with investors willing to accept just 1.26 percent to lend to Germany for a whole 10 years.
The prospect that Federal Reserve would keep rates low for longer encouraged equity investors, though some were cautious in case a key measure of U.S. inflation due later Thursday surprised on the high side.
The price index for personal consumption expenditures is the Fed's favoured measure of inflation and looks likely to have reached its highest since late 2012 in May.
For now most regional markets were in the black with MSCI's broadest index of Asia-Pacific shares outside Japan up 0.89 percent. Japan's Nikkei gained 0.3 percent and Australia almost 1 percent.
Early signs were for a bounce in Europe, with spreadbetters expecting opening gains of 0.2 to 0.3 percent for the FTSE 100 , DAX and CAC 40.
On Wall Street, the Dow had risen 0.29 percent, the S&P 500 0.49 percent and the Nasdaq 0.68 percent.
Shares of CBS shot up 6.2 percent as the U.S. Supreme Court ruled TV startup Aereo violates copyright law by using tiny antennas to provide subscribers with broadcast network content via the Internet.
Markets managed to put a positive spin on data showing the U.S. economy shrank at an annualised 2.9 percent pace in the first quarter, far below already-pessimistic estimates.
Analysts emphasised the weakness was mainly due to one-off factors and a marked rebound was highly likely this quarter.
Yet the result was so poor that it soured the outlook for the entire year, such that the Fed's recently-lowered forecast of 2.2 percent growth for 2014 now seems highly optimistic.
This only added to market expectations the Fed would keep rates near zero well into next year and led investors to push out ever further on the yield curve in search of returns.
HUNTING FOR YIELD
The trend nudged yields on 10-year Treasuries down to 2.56 percent and away from the June peak of 2.66 percent.
The hunt for yield was even more acute in Europe, where the European Central Bank recently started charging banks for taking their cash deposits.
The tide of money pushed yields on German 10-year debt to a one-year trough of 1.26 percent. That in turn widened the spread against U.S. paper out to 130 basis points, giving Treasuries the biggest premium in at least two decades.
That yield advantage could provide the U.S. dollar some support over time, but for now the shock from the GDP numbers kept the currency under pressure.
The dollar index fell as far as 80.091, a low not seen since May 22, while the euro bounced to $1.3633.
Sterling climbed to $1.6990 from a one-week low of $1.6952, while the Australian dollar popped back above 94 U.S. cents from $0.9354.
The New Zealand dollar was another commodity-linked currency doing well, hitting a seven-week high within a hair's breadth of its 2014 peak. The kiwi was up at $0.8764 having surged a full U.S. cent in 24 hours.
The weaker U.S. dollar helped gold steady at $1,317.40 an ounce, from a low of $1,310.36 on Wednesday.
In oil markets, U.S. crude was firmer after news of a government decision to permit exports of lightly-refined oil promised to open a new source of demand for the product.
U.S. crude added 22 cents to $106.72 a barrel, while Brent dipped 6 cents to $113.94. (Editing by Eric Meijer & Shri Navaratnam)