* MSCI World Index up 1.2%; STOXX Europe 600 up 1% * Wall St extends recovery at the end of volatile week * Fed Governor Waller signals policy to stay accommodative * Global asset performance tmsnrt.rs/2yaDPgn NEW YORK, May 14 (Reuters) - U.S. stocks extended their recovery on Friday as investors set aside inflation worries and bought shares hammered by the week’s volatility, with the shift back into riskier assets dragging on the dollar. The jump in shares was in step with buoyant global stocks as investors bet that the U.S. Federal Reserve will not need to raise interest rates sooner than expected to cool prices and reduce the gush of cash that has propelled financial markets. By mid-day, shares had added to early gains and the Dow Jones Industrial Average rose 1%, the S&P 500 climbed 1.5%, and the Nasdaq Composite leapt 2.1%. The MSCI World Index, which tracks 50 markets, jumped 1.5%. But some warned that investors may be too complacent if they ignore the dangers of rising price pressures. “I don’t see us off to the races,” said Tim Ghriskey, chief investment strategist at Inverness Counsel, which manages about $4 billion in assets. He said inflation risks are “real” and financial markets will likely be choppy for some time. “You could buy (stocks) if you could sleep at night with the volatility, but I might have a slug of cash, too.” Mega-cap growth stocks, which have been beaten down this week on concerns over their lofty valuations, led gains in early trading with Apple Inc, Amazon.com Inc and Microsoft Corp gaining about 1% each and Tesla Inc adding 2%. Fears of rising prices burst into the fore this week and spooked markets, and despite assurances from the Federal Reserve that it does not expect to tighten policy anytime soon, some investors worry policymakers may be misjudging inflation risks. That said, data released on Friday showed U.S. retail sales unexpectedly stalled in April as the boost from stimulus checks wore off, further bolstering arguments that the economic recovery was far from roaring, and that rate hikes are not imminent. That appeared to calm markets, for now. The U.S. dollar dropped as risk appetite recovered and the prospect faded of sooner interest rate hikes, which burnishes the currency’s appeal. Against a basket of six major currencies, the U.S. dollar index shed 0.42% to 90.376. A softer dollar lifted the euro, which jumped 0.5% to $1.21360. The surprisingly muted retail sales report weighed on benchmark 10-year Treasury yields, which fell to 1.6454%. Two-year Treasury yields dipped to 0.1530%. The spread between two- and 10-year Treasury yields, which had widened earlier this week when investors were focused on inflation, narrowed to 149 basis points. Pullbacks in the dollar and Treasury yields lifted bullion prices, with spot gold up 0.7% at $1,839.29 an ounce. Oil prices also rebounded on Friday to claw back some of the losses seen the previous day as a weaker dollar increased the appeal of the commodity for holders of other currencies. Brent crude jumped 2.3% at $68.61 a barrel, and U.S. West Texas Intermediate crude also climbed 2.3% to $65.31 a barrel. In cryptocurrencies, bitcoin recovered some ground after skidding 13% this week on reports of a regulatory probe into crypto exchange Binance, and after Tesla’s chief executive, Elon Musk, said the carmaker will stop accepting the token as payment due to environmental concerns. By mid-day, Bitcoin was up 2.5% at $50.977. Reporting by Koh Gui Qing in New York and Simon Jessop in London; Editing by Marguerita Choy, Mark Heinrich and Nick Zieminski Our Standards: The Thomson Reuters Trust Principles.