* MSCI world index up 0.13% on day, over 2% on week * Oil on track for 5th weekly gain * European stocks rise 0.1% towards recent record highs LONDON, June 25 (Reuters) - Global equities edged towards record highs on Friday after U.S. President Joe Biden embraced a bipartisan Senate infrastructure deal, raising hopes for an extended rebound in the world’s largest economy, and a tight supply outlook boosted oil. Investors have been looking to an infrastructure agreement to extend the U.S. recovery after massive fiscal stimulus helped the U.S. economy grow at a 6.4% annualized rate in the first quarter. The plan is valued at $1.2 trillion over eight years, $579 billion of which is new spending. “The positive market tone recognizes the potential growth benefits of the compromise, but with the smaller size tempering some of the tax implications to pay for it,” said Kerry Craig, global market strategist at J.P. Morgan Asset Management. MSCI’s all-country index rose 0.13%, nearing a record high reached on June 15 and bringing gains for the week to more than 2%. European stocks rose 0.1% towards record highs hit this month, after the S&P 500 gained 0.58% and the Nasdaq Composite added 0.69%, lifting both indexes to record-high closes. The Dow Jones Industrial Average rose 0.95%. Germany’s DAX was steady and Britain’s FTSE index was up 0.14%. Monetary and fiscal stimulus around the world in response to the COVID-19 pandemic is boosting financial assets, despite an uneven pace of recovery between regions, said Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management. “Bonds go up, equity goes up, commodities go up - that is very much a liquidity-driven market,” Cheng said. Oil prices climbed for a third successive session, and were on track for a fifth consecutive weekly gain, as growth in demand is expected to outstrip supply on bets that OPEC+ producers will be cautious in returning more output to the market from August. U.S. West Texas Intermediate crude rose 0.2% to $73.40 per barrel and global benchmark Brent crude was at $75.70, up 0.19% on the day. Both benchmark contracts settled on Thursday at their highest levels since October 2018. Securing bipartisan agreement on the infrastructure deal required Biden to sacrifice some of his ambitions on schools, climate change mitigation and support for parents and caregivers, as well as tax increases on the rich and corporations. But alongside growth expectations, markets are also fretting about inflation. The core personal consumption expenditures index, an inflation gauge tracked closely by the Federal Reserve, is expected to post year-on-year gains of 3.4% later on Friday. Benchmark 10-year U.S. Treasuries, which saw yields dip after the infrastructure bill announcement, were last at 1.4901%, up from a close of 1.487% on Thursday. Germany’s 10-year yield, the benchmark for the euro area, was little changed at -0.179%. In the currency market, the dollar index was down 0.12% at 91.73 as investors continued to weigh the likelihood of Fed tightening in the face of persistent inflation. The Japanese yen was steady at 110.76 and the euro gained 0.13% to $1.1946. In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose nearly 1%, and Chinese blue chips rallied 1.63%. Hong Kong’s Hang Seng added 1.4%, Seoul’s Kospi was up 0.51% and Australian shares climbed 0.45%. Japan’s Nikkei rose 0.66%. Spot gold was up 0.35% at $1,781.55 an ounce, on track for its first weekly rise in four. Additional reporting by Tom Westbrook in Singapore; Editing by Ana Nicolaci da Costa, Kim Coghill and Timothy Heritage Our Standards: The Thomson Reuters Trust Principles.