July 8, 2019 / 7:01 PM / 12 days ago

GLOBAL MARKETS-Stocks fall on dimming prospects for sharp U.S. rate cut

    * GRAPHIC-European stocks: tmsnrt.rs/2YHThhg
    * Strong U.S. payrolls temper Fed rate cut expectations
    * Deutsche Bank shares drop on overhaul move
    * Turkish lira slides on central bank shakeup

 (Updates to mid-afternoon in U.S. markets)
    By April Joyner
    NEW YORK, July 8 (Reuters) - Stocks around the world fell on
Monday after strong U.S. job gains tempered expectations the
Federal Reserve will deliver a large interest rate cut at the
end of July.
    U.S. equities continued their slide from Friday, when the
June employment data was released, as hopes of a steep Fed rate
cut faded. U.S. stocks were also weighed by losses in shares of
Apple Inc         , following an analyst downgrade, and Boeing
Co       , after a Saudi Arabian airline said it would not
proceed with an order for its jets.
    European stocks edged lower. The STOXX 600          ended
down 0.1%, as Deutsche Bank's            announcement that it
would cut 18,000 jobs around the world in a restructuring plan
dragged down bank shares.             
    MSCI's gauge of emerging market equities           fell 1.3%
as Asian shares closed lower and the dollar edged up in reaction
to dampened expectations for a sharp Fed rate cut.
    U.S. investment bank Morgan Stanley's decision to reduce its
exposure to global equities due to misgivings about the ability
of policy easing to offset weaker economic data also weighed on
investor sentiment.
    U.S. Treasury debt yields fell, after gaining on Friday in
response to the U.S. employment data.
    Federal Reserve Chairman Jerome Powell is scheduled to give
testimony on monetary policy before Congress on Wednesday and
Thursday, which some investors expect will provide clues
regarding the likelihood of a rate cut from the U.S. central
bank when it meets at the end of the month.
    "It's definitely an opportunity for him to set or reset the
expectation for a 25-basis-point rate cut," said Michael
O'Rourke, chief market strategist at JonesTrading in Greenwich,
Connecticut. "The strong jobs report is an indicator that they
shouldn't lower rates."
    The Dow Jones Industrial Average        fell 129.76 points,
or 0.48%, to 26,792.36, the S&P 500        lost 16.54 points, or
0.55%, to 2,973.87 and the Nasdaq Composite         dropped
68.52 points, or 0.84%, to 8,093.28.
    MSCI's gauge of stocks across the globe                 shed
0.63%.
    Benchmark 10-year U.S. Treasury notes             last rose
5/32 in price to yield 2.0268%, from 2.044% late on Friday.
    
    CURRENCIES AND GEOPOLITICS
    In currency markets, the Turkish lira        weakened 2.0%
against the dollar after President Tayyip Erdogan dismissed
central bank Governor Murat Cetinkaya, whose four-year term was
due to run until 2020, and replaced him with his deputy, Murat
Uysal.             
    Erdogan sacked Cetinkaya for refusing the government's
repeated demands for interest rate cuts, laying bare differences
over the timing of cuts to revive the recession-hit economy.
    The dollar index        rose 0.08%, while the euro       
dropped 0.09% against the greenback to $1.1214.             
    The British pound        edged down 0.07% to $1.2514, after
hitting a six-month low against the dollar on Friday as a result
of poor economic data and a rise in expectations that the Bank
of England will cut interest rates.
    Geopolitics were in focus in oil markets following news on
Sunday that Iran would boost its uranium enrichment in breach of
a cap set by a landmark 2015 nuclear deal. On Monday Iran said
it has passed the 3.6% cap and may enrich at even higher
levels            
    U.S. crude        futures rose 47 cents, or 0.8 percent, to
$57.98 a barrel. Brent crude         futures rose 15 cents, up a
0.2 percent, to $64.38 a barrel.             
    Spot gold        dropped 0.2% to $1,397.41 an ounce as the
dollar rose.             

    
 (Reporting by April Joyner
Additional reporting by Stephanie Kelly in New York, Tom Arnold
in London;
Editing by James Dalgleish and Leslie Adler)
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