* European shares lower after ZEW sentiment index dips
* U.S. dollar index down but holds above last week's lows
* U.S. Treasuries flat ahead of Bernanke testimony
* Brent crude oil hits 3-month high before turning lower
By Herbert Lash
NEW YORK, July 16 The dollar fell and U.S.
stocks edged lower on Tuesday, pausing after an eight-day
advance by the benchmark S&P 500 index, as investors took a
cautious stance before the Federal Reserve chief's testimony to
a congressional panel on Wednesday.
Analysts expect Fed Chairman Ben Bernanke to reiterate
previous remarks that U.S. monetary policy will remain
accommodative. But investors will look for clues as to when the
U.S. central bank might start reducing its economic stimulus
The dollar's losses against the euro were limited after data
showing an unexpected fall in German investor sentiment in July
and subdued euro zone inflation added to expectations the
European Central Bank also will keep rates low to aid the
U.S. stocks fell, in tandem with a sharper decline in
European stock markets.
The euro rose 0.52 percent to $1.3130, recovering
from $1.3057 struck after the German ZEW survey of investor
sentiment survey. Against the yen, the dollar lost 0.57
percent to 99.28.
The dollar fell late last week after Bernanke said highly
accommodative monetary policy would be needed for the
foreseeable future. Bernanke's remarks on the economy and
monetary policy will be released at 8:30 a.m. (1230 GMT)on
"Bernanke will be a dove in his testimony and it will
continue to surprise me that it is actually not fully priced
in," said Sebastien Galy, foreign exchange strategist at Societe
Generale in New York.
The Dow Jones industrial average fell 32.31 points or
0.21 percent, to 15,451.95, the S&P 500 lost 5.58 points
or 0.33 percent, to 1,676.92 and the Nasdaq Composite
dropped 10.35 points or 0.29 percent, to 3,597.14.
The pan-European FTSEurofirst 300 index closed down
0.63 percent at a provisional 1,192.40 points, while a measure
of global equity markets, MSCI's all-country world index
, fell 0.1 percent.
U.S. Treasuries prices were flat before Bernanke's
testimony. He is expected to stress the Fed will hold rates low
for a long time.
Benchmark 10-year Treasuries yields have fallen
from two-year highs of 2.76 percent on July 8 as officials have
tried to soothe concerns over the pace at which the Fed will
begin to phase out its unprecedented quantitative easing
The 10-year T-bill was trading flat to yield 2.5430 percent.
Tom Tucci, head of Treasuries trading at CIBC in New York,
said the central banks would like to stop their bond-buying to
help the economy.
"The way they are going to get out of it is by giving
forward guidance that they are going to be extremely easy in the
front end for a long period of time, which will anchor rates
lower overall," Tucci said.
U.S. consumer prices accelerated in June, but underlying
inflation pressures showed signs of stabilizing, keeping on
track expectations the Federal Reserve will start tapering its
bond purchases later this year.
Other data on Tuesday showed industrial production pushed
higher in June, raising hope a recent slowdown in factory
activity was either over or close to running its course.
Crude prices traded near break-even.
Brent crude was flat at $109.09 a barrel. U.S. oil
was down 13 cents to $106.19.