GLOBAL MARKETS-Fed pause sets stocks for best January on record, yields fall

(Adds oil, gold settlement prices, trade talk comment)

* GRAPHIC-World FX rates in 2019:

* Stocks gain broadly after Fed’s policy caution

* Fed slams brakes on rate hikes, Treasury yields skid

* Facebook soars after better-than-expected results

NEW YORK, Jan 31 (Reuters) - Global equity markets mostly rose on Thursday, propelled by Facebook’s upbeat earnings and the Federal Reserve’s pledge to be patient in raising borrowing costs further, while U.S. bond yields fell on indications of weaker-than-expected inflation.

Brent oil prices, an international benchmark, rose for a third day, extending a rally this month as an output cut by the Organization of the Petroleum Exporting Countries, Russia and others took effect. U.S. oil pared gains to close lower.

MSCI’s gauge of global stock performance and an emerging markets index rose, as did the Nasdaq and S&P 500 on Wall Street, propelled by an 11.5 percent gain by Facebook after its quarterly results topped analysts’ estimates.

European shares closed mostly flat and the Dow fell on a downbeat report by DowDuPont Inc, as investors awaited news about the U.S.-China trade talks in Washington.

U.S. and Chinese officials made “some progress” in addressing differences over intellectual property rights and market access issues, but gaps exist in other structural issues, U.S. Chamber of Commerce officials briefed on trade talks said.

The Fed’s dovish stance on monetary policy eased concerns that tightening financial conditions could crimp growth.

“It seems as if most of the fears have been taken away except for trade,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

E-commerce behemoth Amazon was the other big focus, with it set to report results after the closing bell.

MSCI’s gauge of stocks across the globe rose 0.81 percent, on track to its best January on record, and its emerging market index gained 1.25 percent.

European shares ended a choppy session flat as disappointing economic data, including a technical recession in Italy, sapped an early boost provided by the Fed’s dovish tone.

German retail sales fell at the fastest rate in 11 years, British car production posted its biggest drop since 2009 and euro zone growth was the slowest in four years.

The STOXX 600 ended the day up 0.04 percent but gained 6.1 percent in January, its strongest month since October 2015.

The FTSEurofirst 300 index of leading European shares closed up 0.23 percent, with oil heavyweights Royal Dutch Shell, BP and Total among top gainers.

The dollar index rose 0.25 percent, with the euro down 0.3 percent to $1.1442. The Japanese yen firmed 0.15 percent versus the greenback at 108.89 per dollar.

The Employment Cost Index, the broadest measure of U.S. labor costs, rose 0.7 percent in the fourth quarter after an unrevised 0.8 percent gain the previous quarter, the Labor Department said.

The data continued a pattern of low inflation.

Two-year U.S. Treasury debt yields, which reflect expectations of interest rate hikes, fell to a nearly four-week low of 2.49 percent.

“What you’ve seen the last couple days with the market is the Street’s reaction to recognition that cheap money is going to continue for the foreseeable future,” said Brian Ward, chief executive of Trimont Real Estate Advisors in Atlanta.

The 10-year U.S. Treasury note rose 14/32 in price to push its yield down to 2.6453 percent.

U.S. West Texas Intermediate (WTI) crude futures fell 44 cents to settle at $53.79 per barrel. Brent crude oil futures rose 24 cents to settle at $61.89.

U.S. gold futures settled up 0.7 percent to $1,319.70 an ounce.

Reporting by Herbert Lash in New York, additional reporting by Sruthi Shankar in Bengaluru Editing by Phil Berlowitz and James Dalgleish