GLOBAL MARKETS-Stocks struggle, oil jumps on Middle East tensions

* Oil prices jump on fresh Middle East tensions
* European stocks edge higher, Britain's FTSE up 0.4%
* Sterling falls nearly 0.5% on increasing no-deal Brexit
fears
* Media report puts 25 bps Fed rate cut expectations back in
play
* U.S. futures point to firmer open

By Karin Strohecker
LONDON, July 22 (Reuters) - European stocks lingered on
Monday, hamstrung by dialled-down expectations for a larger U.S.
rate cut this month, while escalating tensions in the Middle
East boosted oil prices and rising fears for a no-deal Brexit
haunted the pound.
MSCI's broad index of world stocks .MIWD00000PUS slipped
0.1%, pulling further away from the near-year-and-a-half high
reached earlier in June after falls in much of Asia.
.MIAPJ0000PUS
Europe's regional STOXX 600 index .STOXX was treading
water, Germany's DAX .GDAXI and France's CAC .FCHI rose 0.2%
and Britain's FTSE .FTSE jumped 0.4%.
Energy stocks booked the largest gains in Europe after crude
oil prices jumped around $1 per barrel, on concern that Iran's
seizure of a British tanker last week may lead to disruptions in
the Middle East. O/R
Meanwhile, investors were shunning real estate stocks
.SX86P that would benefit from lower interest rates and
defensive sectors such as utilities .SX6P and telecoms .SXKP
ahead of a big week for earnings.
"Sentiment about company earnings potential appears to be
mixed at best, with some evidence that we might be seeing a bit
of a pickup in economic data, after a slow first half of the
year," said Michael Hewson at CMC Markets.
"The pickup in U.S. economic data last week, as well as
contradictory commentary from Fed officials, appears to be
muddying the waters for investors about the possible reaction
function of the U.S. Federal Reserve at the end of this month
and whether we can expect to see a 25 basis point or 50 basis
point rate cut."
Momentum looked better for Wall Street. U.S. futures ESc1
NQc1 pointed to a 0.3% to 0.5% higher open.
Global stocks rose towards the end of last week after dovish
comments by New York Fed President John Williams boosted
expectations the world's top central bank would lower rates by
50 basis points at its July 30-31 meeting.
They gave back those gains and Wall Street shares fell after
the New York Fed walked back Williams' comments by saying his
speech was not about upcoming policy action.
Hopes for a larger cut were curtailed even more after the
Wall Street Journal reported the Fed was likely to cut rates by
25 bps this month, and may trim further in the future given
global growth and trade uncertainties. The dollar inched higher and U.S. Treasury yields held
steady on the greater likelihood of a shallower rate cut. The
dollar index .DXY gained to 97.193 against a basket of six
major currencies after rising 0.4% on Friday.
The euro EUR= was little changed at $1.1219 after shedding
0.5% on Friday. The dollar edged up 0.16% to 107.86 yen JPY= .
The benchmark 10-year Treasury yield US10YT=RR lingered at
2.0429%. Still, the pressure on equity markets limited the rise
in safe-haven Treasury yields.
"Market direction will be driven increasingly by macro
economic data; central bank policy responses are in the prices
already and earnings are unable to lift the equity markets so
the dynamics will be economic data and the concerns about
geo-political risks and trade," said Larry Hatheway, head of GAM
Investment Solutions & Chief Economist in Zurich.
"The market will struggle to find direction until autumn and
we may have another pullback in capital markets."
Trump last week by renewed a threat to impose tariffs on
another $325 billion of Chinese goods, even as hopes grew that
the two sides would soon resume face-to-face negotiations in a
bid to end their year-long trade war. Elsewhere in currencies, the pound fell nearly half a
percent amid increasing bets on a no-deal Brexit before the
Conservative Party chooses its new leader on Tuesday. The pound
was last down 0.3% at $1.2463 GBP=D3 , having declined 1.6%
against the dollar so far this month. It was also lower against
the euro at 89.98 EURGBP=D3 .
In commodities, Brent crude futures LCOc1 and U.S. crude
futures CLc1 jumped around $1 to $63.46 and $56.36 per barrel
following a 1% jump on Friday.
Iran's Revolutionary Guards on Friday captured a
British-flagged oil tanker in the Strait of Hormuz after Britain
seized an Iranian vessel earlier this month, further raising
tensions along a vital international route for oil shipments.
Spot gold XAU= hovered at $1,425.9 an ounce after rising
as high as $1,452.60 on Friday, its strongest since May 2013.