GLOBAL MARKETS-U.S. stocks and bonds slip; crude higher

Mon Jan 28, 2013 12:09pm EST

* Caution ahead of U.S. GDP, payrolls reports

* Caterpillar earnings up, but markets pause

* Fitch scales back chance of U.S. rating cut

NEW YORK, Jan 28 (Reuters) - U.S. stock indexes were under pressure on Monday, following the trend elsewhere in the world, though oil prices rose on strong U.S. durable goods data and earnings results from Caterpillar.

Investor optimism got a small boost after rating agency Fitch scaled back the chance it will strip the United States of its AAA status, saying a recent deal on the country's debt limit removed the near-term risk of a cut.

Prices for U.S. Treasuries slid after a gauge of planned U.S. business spending rose in December and investors pushed for price concessions ahead of a debt auction later in the day..

But there was wariness in anticipation of a series of significant U.S. economic events this week, including the initial estimate of fourth-quarter GDP, the Federal Reserve's first policy meeting of the year and January payrolls data.

"You can't find more of a global bellwether than Cat, and people are pleased with the number, which suggests there could be less concern about slowing growth in China after this," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.

The Dow Jones industrial average was down 0.23 points, or 0.00 percent, at 13,895.75. The Standard & Poor's 500 Index was down 0.48 points, or 0.03 percent, at 1,502.48. The Nasdaq Composite Index was up 11.62 points, or 0.37 percent, at 3,161.33.

"Markets don't go up in a straight line," said Garry Evans, global head of equity strategy at HSBC In London. "I think that people are realizing there could still be problems out there."

Adding to potential pitfalls ahead were signs from Washington that the $1.2 trillion in automatic spending cuts due to take effect by March 1 could go ahead, threatening a hit to confidence in the giant U.S. economy.

Fitch said a downgrade was still likely later in the year if Washington failed to use the new breathing space to put in place a credible debt reduction plan.

A strong start to the earnings season has boosted U.S. equities, with major averages rising for four straight weeks. The S&P has gained for eight straight days, its longest winning streak in eight years.

But MSCI's benchmark world share index was down 0.2 percent on Monday after a nearly 4.5 percent gain this month on signs of economic recovery in the United States, stabilization in the euro zone and accelerating growth in China.

European stocks slipped 0.1 percent, with the broad FTSEurofirst 300 index of top company shares hovering just under a two-year high.

The market's softer tone also followed a weaker session in Asia, where falls in technology companies caused MSCI's broadest index of Asia-Pacific shares outside Japan to drop 0.5 percent.

EUROPEAN ECONOMY FLAT

Data from the European Central Bank gave another reminder that the recent surge in financial markets is not being matched in the real economy.

Lending by banks to euro zone companies, consumers and home buyers contracted in December for the eighth straight month as recessions across much of the region sap the appetite to borrow and banks' willingness to lend.

"As of the end of 2012, there was no sign of improvement in credit flows," said Marie Diron, an economist who works on Ernst & Young's euro zone forecasts in London.

Data showing inflows to global equity funds slowed in the past week and comments from several major investment banks noting signs that the market may be reaching a natural top added to the caution.

CURRENCIES DIVERGE

U.S. Treasury debt prices were lower. The benchmark 10-year U.S. Treasury note was down 10/32, the yield at 1.9846 percent.

The euro was little changed against the dollar at $1.3457 , though slipping from an 11-month high touched on Friday. The prospects of a member country being forced to leave the euro zone have all but vanished since the middle of last year, a survey released on Monday showed..

The dollar was down 0.2 percent against the yen after the U.S. home sales data, though the Japanese currency is expected to remain weak on expectations Japan's government will keep pushing for aggressive monetary easing, whereas the Fed's view could change if the economic recovery strengthens.

In commodity markets, Brent oil prices steadied near a three-month high at just over $113 a barrel before the Fed meeting on Tuesday and Wednesday and U.S. employment data on Friday expected to show more signs of recovery in the world's biggest oil consumer.

U.S. light sweet crude oil rose 42 cents, or 0.44 percent, to $96.30 per barrel.