* Stock indexes around the world fall on economic/trade
jitters
* Investors weigh U.S. data and ongoing trade tensions
* Hopes high for Fed rate cut hints ahead of June meeting
(Updates to late afternoon, adds commentary)
By Sinéad Carew
NEW YORK, June 12 (Reuters) - Oil futures sank 4% on
Wednesday amid higher U.S. crude inventories and a bleaker
demand outlook, while uncertainty over the U.S.-China trade war
and U.S. economic data weighed on stocks.
The dollar index .DXY rose as trade tensions and U.S.
interest rate policy remained in focus after President Donald
Trump expressed optimism over making a trade deal with China.
Earlier in the day, May data showed moderate inflation as
U.S. consumer prices barely rose. That, with a slowing economy,
could build a case for the Federal Reserve to cut interest
rates. "Typically the market would read that as being a negative
for the economy," said Matt Watson, associate director of
research at James Investment Research in Alpha, Ohio.
Investors were hoping the U.S. Federal Reserve would give
hints about a rate cut after its June 18-19 meeting.
And after a five-day rally, Watson said: "we're seeing a
little bit of profit taking prior to investors going into a wait
and see mode before the Fed meeting next week to see if they're
going to lower interest rates or not."
While market participants eyed the latest data as potential
support for a rate cut, it was not enough to outweigh worries
about the economic impact of escalating trade tensions.
With under three weeks to go before proposed talks between
U.S. President Donald Trump and Chinese President Xi Jinping at
the June 28-29 G20 summit in Osaka, Trump said on Wednesday that
he had a "feeling" a U.S.-China trade deal could be reached. But
he again threatened to increase tariffs on Chinese goods if
there is no agreement. The Dow Jones Industrial Average .DJI fell 58.02 points,
or 0.22%, to 25,990.49, the S&P 500 .SPX lost 6.77 points, or
0.23%, to 2,878.95 and the Nasdaq Composite .IXIC dropped
32.40 points, or 0.41%, to 7,790.17.
The pan-European STOXX 600 index .STOXX lost 0.30% and
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.39%.
OIL FALLS, TREASURY YIELD CURVE STEEPENS
The U.S. Treasury yield curve was steeper after soft inflation
data pulled short-dated yields lower, indicating increased
expectations the Federal Reserve will cut interest rates.
Looking ahead, "focus will continue to turn to headlines
surrounding trade. Also in focus the remainder of the week will
be the $16 billion 30-year auction tomorrow (Thursday) and
retail sales on Friday," wrote Justin Lederer, Treasury analyst
and trader at Cantor Fitzgerald. Benchmark 10-year notes US10YT=RR last rose 5/32 in price
to yield 2.1239%, from 2.14% late on Tuesday.
In currency markets, the dollar index .DXY , tracking the
currency against six major peers, rose 0.32%, with the euro
EUR= down 0.4% to $1.1284.
The euro dropped as Trump said he was considering sanctions
over Russia's Nord Stream 2 natural gas pipeline project and
warned Germany against being dependent on Russia for energy.
Oil prices extended their losses as the day wore on,
weakened by an unexpected rise in U.S. crude inventories and by
a dimming outlook for global oil demand. L4N23J0NR
"The fact that this surplus has been mounting during the
past couple of months despite a near record pace of exports in
recent weeks is not only suggesting weak demand from the
refiners but also a much stronger pace of imports than we had
anticipated," Jim Ritterbusch of Ritterbusch and Associates said
in a note.
U.S. crude CLcv1 was down 4.0% at $51.14 per barrel while
Brent crude futures settled down 3.7% or $2.32 at $59.97.
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GRAPHIC-Asia stock markets https://tmsnrt.rs/2zpUAr4
GRAPHIC-Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
GRAPHIC-Past trade spats have caused dollar depreciation https://tmsnrt.rs/2WR0HkT
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