GLOBAL MARKETS-Dollar gains but Wall Street retreats as Fed nixes dovish measure

(Adds Wall Street closing)
* Fed policymakers zero in on strategy tweaks, minutes show
* Dollar claws back from 27-month low
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Alwyn Scott
NEW YORK, Aug 19 (Reuters) - The dollar and global equity
markets rose on Wednesday and the S&P 500 and the Nasdaq hit
fresh all-time highs, but Wall Street retreated after the
Federal Reserve nixed, for now, dovish monetary policy measures
such as yield-curve control.
The U.S. central bank also cautioned in minutes of its July
29-29 meeting that economic recovery remains highly uncertain,
that job gains in May and June had likely slowed, and that
"substantial improvement" in the labor market would hinge on a
"broad and sustained" reopening of businesses. The readout on Fed discussions provides hints to further
action that the U.S. central bank could take in September. No
change in interest rate policy is expected until end-2021.
"The minutes are saying that the Fed doesn't really seem
interested in implementing yield-curve control," said Nancy
Davis, chief investment officer of Quadratic Capital in
Greenwich, Connecticut.
Trillions of dollars in stimulus, equal to 14% of gross
domestic product, has led to asset price inflation and currency
depreciation, Davis said. The equity and fixed-income markets
are totally disconnected, Davis added.
Some investors had been hoping that the Fed might follow
through on a proposed policy to cap yields at a certain level by
buying short-term debt, a move that would reinforce the central
bank's guidance that rates are staying low for now.
Longer-maturity U.S. Treasuries rose on the news, which said
policymakers judged yield caps and targets are "not warranted"
now but should remain option for future.
Treasuries Benchmark 10-year notes US10YT=RR last rose
5/32 in price to yield 0.6541%, from 0.669% late on Tuesday.
The 30-year bond US30YT=RR last rose 22/32 in price to
yield 1.3705%, from 1.399%.
The dollar index =USD , which reflects the greenback's
value against six leading trading currencies, rose 0.88%, with
the euro EUR= down 0.75% to $1.184. The Japanese yen JPY=
weakened 0.62% versus the U.S. currency to 106.05 per dollar.
Before the Fed news, the S&P 500 and the Nasdaq hit all-time
highs, driven largely by Apple Inc AAPL.O . Its shares rose
1.4% to make it the first publicly listed U.S. company to reach
$2 trillion in market capitalization, with strong results from
retailers Target and Lowe's also lifting sentiment. But Wall Street later retreated. The Dow Jones Industrial
Average .DJI fell 0.29%, the S&P 500 .SPX lost 0.28% and the
Nasdaq Composite .IXIC dropped 0.41%.
The dollar index =USD rose 0.805%, with the euro EUR=
down 0.67% to $1.1849.
The Japanese yen JPY= weakened 0.46% versus the greenback
at 105.88 per dollar.
Spot gold prices XAU= fell 2.99% to $1,941.06 an ounce.
Brent crude futures LCOc1 fell $0.18 to $45.28 a barrel.
U.S. crude futures CLc1 slid $0.04 to $42.85 a barrel.
Earlier, in Europe, travel and leisure shares rose, with
British Airways owner International Airlines Group ICAG.L up
5.3% on a British plan to use COVID-19 testing at London's
Heathrow Airport to help cut the time travelers have to spend in
quarantine. MSCI's benchmark for global equity markets .MIWD00000PUS
rose 0.25% to 573.33, while its index for emerging markets
stocks .MSCIEF rose 0.45%.
Europe's broad FTSEurofirst 300 index .FTEU3 added 0.68%
to 1,434.54. Overnight, MSCI's broadest index of Asia-Pacific shares
outside of Japan .MIAPJ0000PUS fell 0.2%, retreating from a
seven-month high hit after the S&P 500's .SPX record.

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GRAPHIC-Emerging markets http://tmsnrt.rs/2ihRugV
GRAPHIC-World FX rates http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
GRAPHIC-Global assets in 2020 http://tmsnrt.rs/2jvdmXl
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