* Weekly jobless claims drop 38,000 to 406,000 * Benchmark U.S. 10-year Treasury yield gains * Gold falls, oil prices rise * Dollar index down ahead of Friday inflation data NEW YORK, May 27 (Reuters) - World equity markets and U.S. Treasury yields rose on Thursday as better-than-expected jobless claims data and a positive report on first-quarter gross domestic product showed that economic recovery is gathering steam. The number of Americans filing new claims for unemployment benefits dropped to 406,000 for the week ended May 22, according to the U.S. Labor Department, as layoffs subsided, with companies desperate for workers to meet surging demand unleashed by a rapidly reopening economy. That was the lowest since mid-March 2020 and kept claims below 500,000 for three straight weeks. Economists polled by Reuters had forecast 425,000 applications for the latest week. A separate report from the Commerce Department on Thursday confirmed economic growth accelerated at a 6.4% annualized rate last quarter, thanks to the massive fiscal stimulus. The data, which was unrevised from the estimate reported last month, was the second-fastest GDP growth since the third quarter of 2003. In late-morning trading, the benchmark 10-year Treasury yield rose to 1.6147% from 1.574% late on Wednesday. “This is the first time that continuing jobless claims beat expectations and it shows that more people are starting to go back to work and this is very positive for the economy,” said Thomas Hayes, managing member at Great Hill Capital. The MSCI world equity index rose 0.15% to 709.59. Europe’s broadest stock index gained 0.37%, driven by industrials, basic materials and financial sectors. On Wall Street, all major indexes were trading higher with industrials, communications services, and financial stocks making the most gains. The Dow Jones Industrial Average rose 0.24%, to 34,404.66, the S&P 500 gained 0.15%, to 4,202.39 and the Nasdaq Composite added 0.08%, to 13,748.40. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan clawed back losses to trade flat, just below Wednesday’s near-two week high. Multiple Federal Reserve officials made comments this week to calm inflation worries and signal a possible start to talks to end the central bank’s bond buying program. Vice Chair Richard Clarida said this week recent inflation pressures would “prove to be largely transitory”, though he did add that policymakers will be at a point to begin discussing tapering in upcoming meetings. The Fed Vice Chair for supervision, Randal Quarles, suggested that at some stage it will become important for the U.S. central bank to discuss plans to tighten its asset purchase programme. The dollar index traded in a narrow range on Thursday as traders still looked toward an upcoming inflation report closely watched by Federal Reserve. The index was down 0.62% in the late morning trading. Safe-haven gold retreated on Thursday, weighed down by the upbeat U.S. data that showed a recovery was on track, while rising Treasury yields further added pressure. Spot gold fell 0.24% to $1,892.16 per ounce, having slipped back below the key psychological $1,900 level. Oil prices rose on Thursday, bolstered by strong U.S. economic data that offset investors’ concerns about the potential for a rise in Iranian supplies. Brent gained 20 cents to $69.07 a barrel, while U.S. West Texas Intermediate (WTI) crude added 32 cents to $66.53 a barrel. Reporting by Chibuike Oguh in New York, Editing by William Maclean Our Standards: The Thomson Reuters Trust Principles.