NEW YORK Major world equity markets were mildly negative on Tuesday, the euro edged down and gold rose as traders kept an eye on tensions between Ukraine and Russia and the pace of growth in China.
Credit market investors, meanwhile, were jumping all over Puerto Rico's $3.5 billion municipal bond sale, which attracted huge interest from many types of funds, including hedge funds and high-net-worth names.
Markets have taken a break from recent volatile trading, and moves in most major stock markets were relatively muted. An index of global stocks .MIWD00000PUS slipped, while the benchmark U.S. S&P 500 was lower as well.
"The market has growing pains here, and rightfully so," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
"Basically we are at high levels, there are a lot of warnings out there, a lot of signs the market may be topping out."
The U.S. Treasury market was muted, with the 10-year yield slightly lower to 2.769 percent, rising 3/32 in price. The activity in credit markets was focused on the municipal sector, where the island of Puerto Rico sold $3.5 billion in debt to shore up its struggling finances.
The bonds sold at an 8 percent coupon with a yield of 8.727 percent, levels much less expensive than expected in that market, and several other Puerto Rico bonds were seeing additional buying as non-traditional investors, including hedge funds, took the opportunity to grab this high-yield debt.
"For investors, this is a great return, and we've heard there was a lot of high net worth interest in this deal. These are tax-sensitive investors and they were heavily pitched on it," David Tawil, co-founder of Maglan Capital in New York.
The Dow Jones industrial average .DJI fell 46.85 points or 0.29 percent, to 16,371.83, the S&P 500 .SPX lost 6.07 points or 0.32 percent, to 1,871.1 and the Nasdaq Composite .IXIC dropped 11.139 points or 0.26 percent, to 4,323.309.
Economic figures were limited on Tuesday. A sharp fall in wholesale sales surprised investors and led to a buildup in inventories in January, particularly in autos and machinery stocks. Wholesale inventories rose 0.6 percent. This is a positive for first-quarter growth, though economists expect the weak sales figure to be reversed.
The euro fell against the dollar and the yen on Tuesday after European Central Bank (ECB) Vice President Vitor Constancio told investors that they may have missed the message on policy that rates are set to remain accommodative for some time to come.
Strong trade data from Germany, the region's economic powerhouse, helped the country's DAX .GDAXI index outperform, as it rose 0.9 percent.
"Recent events, especially concerning Russia and Turkey, have made the outlook less certain, and their impact will only be felt in a few months from now," said Markus Huber, a senior sales trader at Peregrine & Black.
Tensions over Ukraine continued to build on Tuesday. With diplomacy at a standstill, Ukraine's acting president announced the formation of a volunteer national guard, while ousted leader Viktor Yanukovich insisted he remained the country's legitimate leader.
Turkish assets have been hit by political scandals and a power struggle between Prime Minister Tayyip Erdogan and a U.S.-based Muslim cleric.
Investors worried about the pace of growth in China have taken out their frustrations on Chinese steel futures and spot iron ore prices of late. Steel rebar futures traded on the Shanghai Futures Exchange hit their lowest levels ever and spot iron ore prices posted the biggest one-day fall in over four years on Monday after China's trade balance swung into deficit
Against a basket of currencies .DXY, the U.S. dollar edged higher by late morning to trade up 0.01 percent.
Gold extended early gains as Ukraine strengthened the bid in that market. The yellow metal was at $1,346 an ounce. In a sign of the recent jump in demand, the world's biggest bullion-backed exchange-traded fund saw its largest inflow in a month on Monday.
Brent crude, Europe's regional benchmark, edged up 34 cents to $108.44 a barrel, while U.S. oil slipped 81 cents to $100.32.
(Additional reporting by A. Ananthalakshmi in Singapore, Wayne Cole in Sydney, Anirban Nag, and Simon Jessop and Francesco Canepa in London; Editing by Chris Reese and Chizu Nomiyama)