* Oil prices inch up on supply cut expectations
* European stocks climb after upbeat data
* Wall Street rises as Trump federal budget plan released
* Sterling subdued after Manchester attack (Adds settled oil prices; updates throughout)
By Hilary Russ
NEW YORK, May 23 (Reuters) - Oil prices inched up on Tuesday on expectations of a supply cut, and Wall Street ticked higher as a U.S. federal budget proposal called for slashing healthcare programs and boosting military spending.
U.S. Treasury bond yields hovered near session highs after a solid 2-year debt auction while shares across the euro zone closed higher on strong growth data.
Businesses across the euro zone were on their strongest run since 2011, according to IHS Markit's Flash Composite Purchasing Managers' Index for May. It matched the previous month's 56.8, its highest since April 2011. A reading above 50 indicates growth.
"It's a very good result and it's broad-based. We've got a good pace of growth here. The fact we have maintained this high level in May is great news for second-quarter GDP," said Chris Williamson, chief business economist at IHS Markit.
The pan-European FTSEurofirst 300 index rose 0.25 percent and MSCI's gauge of stocks across the globe shed 0.02 percent.
Sterling was subdued after reports showing sluggishness in the UK economy and a suicide bombing at a pop concert in Manchester that killed 22 people and wounded dozens.
"Increasingly the markets are just more and more numb to these. As bad as they are and as horrific as they are, the market immediately looks through these things and uses these as buying opportunities more than anything else,” said Brad Bechtel, managing director FX at Jefferies in New York.
The pound was last down 0.2 percent at $1.2972.
Oil prices rose slightly in volatile trading as expectations of an extension to OPEC-led supply cuts and another drop in U.S. crude inventories offset a White House proposal to sell half the country's petroleum reserves.
U.S. crude oil futures settled at $51.47 per barrel, up 34 cents or 0.66 percent. Brent was last at $54.19, up 0.59 percent.
Investors were parsing President Donald Trump's first full budget plan, released on Tuesday, which calls for an increase in military and infrastructure spending but also a raft of cuts, including healthcare and food assistance.
"People will keep an eye on any sort of indication of corporate tax reform as well as infrastructure spending," said Nadia Lovell, U.S. equity strategist at J.P. Morgan Private Bank in New York.
The Dow Jones Industrial Average rose 45.35 points, or 0.22 percent, to 20,940.18, the S&P 500 gained 3.84 points, or 0.16 percent, to 2,397.86 and the Nasdaq Composite dropped 1.14 points, or 0.02 percent, to 6,132.48.
Trump's budget in its current form is unlikely to be approved by Congress, which will craft its own tax and spending plans.
Treasury debt yields retreated slightly from their session highs after solid demand at a $26 billion auction of a new two-year note issue, the first part of the $88 billion in coupon-bearing government debt supply this week.
The benchmark 10-year yield <US10YT=RR > was last at 2.278 percent, up nearly 2 basis points from late on Monday.
The dollar rose against a basket of major currencies as its worst week of losses in a year drove some profit taking, and investors turned their attention to Wednesday's release of the minutes of the U.S. Federal Reserve's meeting earlier this month.
The index rose 0.31 percent after falling to a more than six-month low on Monday.
In Greece, short-dated government bond yields rose sharply and banking stocks fell after euro zone finance ministers failed to agree debt relief for Greece with the International Monetary Fund and did not release new loans to Athens.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
Additional reporting by Jonathan Cable and Abhinav Ramnarayan in London, George Georgiopoulos in Athens, Roberta Rampton in Washington and Saqib Iqbal Ahmed, Richard Leong and Julia Simon in New York; Editing by Nick Zieminski and Chizu Nomiyama