July 29, 2014 / 9:07 PM / 3 years ago

GLOBAL MARKETS-Shares edge lower while dollar at eight-month highs ahead of Fed, U.S. data

(Updates to U.S. market close)
    * Fed policy meeting, U.S. GDP in focus
    * Dollar up on outlook for hawkish Fed, strong U.S. data
    * Wall St ends lower as UPS outlook disappoints

    By Angela Moon
    NEW YORK, July 29 (Reuters) - World equity markets fell on
Tuesday while the dollar reached  eight-month highs against the
euro on expectations of positive U.S. economic data and a more
hawkish tone from the Federal Reserve.
    Wall Street closed lower, sending the all World benchmark
 down 0.2 percent after a weak outlook from U.S. 
package shipper United Parcel Service Inc weighed on
investor sentiment and pressured transportation stocks.
    Equity investors also showed reluctance to make bold moves
ahead of U.S. economic news due this week, including a Federal
Reserve meeting ending on Wednesday, GDP data on Wednesday and
non-farm payrolls on Friday.
    The Dow Jones industrial average fell 70.48 points or
0.42 percent, to 16,912.11, the S&P 500 dropped 8.96
points or 0.45 percent, to 1,969.95, and the Nasdaq Composite
 eased 2.21 points or 0.05 percent, to 4,442.70.
    U.S. Treasuries prices increased after a new sale of
five-year notes drew solid demand, and the U.S. yield curve
flattened to five-year lows.
    Long-dated Treasuries have been gaining against short- and
intermediate-dated debt as investors reach for higher yields at
the long end and worry about the Federal Reserve raising
interest rates next year.
    The yield spread between U.S. five-year notes and 30-year
bonds flattened on Tuesday to 153 basis points,
the lowest since 2009.
    Thirty-year bond yields fell as low as 3.22
percent, the lowest since June 7 of last year.
    "The theme has really been the flattening," said Justin
Lederer, an interest rate strategist at Cantor Fitzgerald in New
    "Short and intermediates are starting to price in the Fed
ultimately going as we get closer and closer, and the long end
is seeing some very good duration buying," Lederer said.
    The U.S. dollar hit eight-month highs against the euro and
advanced against the yen and Swiss franc. The U.S. dollar index
, which measures the dollar against a basket of six major
currencies, was last up 0.22 percent at 81.202
    Rouble-traded Russian stocks gained despite new 
fighting in Ukraine and expectations of more EU sanctions. The
dollar-denominated RTS index was down slightly. 
    The European Union agreed to impose broad sanctions against
Russian oil companies, banks and defense companies, by far the
strongest international action yet over Moscow's support for
rebels in eastern Ukraine. 
    Oil prices fell, with U.S. crude leading the decline as a
refinery fire in Kansas curbed demand for benchmark WTI, while
concerns over export disruptions stemmed losses for global
marker Brent. 
    U.S. crude settled at $100.97 a barrel, down 70 cents
after touching an intraday low of $100.37, the lowest since

 (Reporting by Angela Moon; Editing by Steve Orlofsky)
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