Equities rise modestly with tariffs, inflation data, earnings in focus

By Sinéad Carew and Nell Mackenzie

NEW YORK/LONDON (Reuters) -MSCI's global equity index edged up on Monday and U.S. Treasury yields edged higher as the latest U.S. tariff threats kept investors on edge while they waited for inflation readings and the start of earnings season due later in the week.

The euro briefly hit an almost three-week low while the dollar index held steady after U.S. President Donald Trump's threat to impose a 30% tariff on imports from the European Union and Mexico from August 1.

Trump said he was open to discussions while the European Union accused the U.S. of resisting efforts to strike a trade deal and warned of countermeasures if no agreement is reached.

Meanwhile, U.S. earnings season, is set to begin on Tuesday, with second-quarter reports from major banks. S&P 500 profits are expected to rise 5.8% year-over-year, according to LSEG data. The outlook has dimmed sharply since the early April forecast of 10.2% growth, before Trump launched his trade war.

"It's all about earnings season now. People are not sure what it's going to hold. They want to be optimistic. Usually earnings season pans out better than expected," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, but he noted that trading valuations are "a bit expensive relative to the five-year average."

"That on top of the most recent tariff announcements has people sort of just waiting on the sidelines," said the money manager.

On Wall Street at 2:39 p.m. EDT, the Dow Jones Industrial Average rose 68.28 points, or 0.15%, to 44,439.79 while the S&P 500 rose 11.67 points, or 0.19%, to 6,271.43 and the Nasdaq Composite rose 68.78 points, or 0.33%, to 20,654.31.

MSCI's gauge of stocks across the globe rose 0.86 point, or 0.09%, to 923.42.

Earlier, the pan-European STOXX 600 index ended off 0.06%, above its session lows. 

PRESSURING POWELL

Trading in long-dated U.S. Treasuries was choppy, with yields touching multiweek peaks as investors weighed the prospect of an exit by Federal Reserve Chairman Jerome Powell.

While Powell has indicated a patient stance on interest rate policy until the impact of tariffs is clearer, Trump has been pushing for aggressive easing. Trump said on Sunday that it would be great if Powell stepped down.

White House economic adviser Kevin Hassett warned that Trump might have grounds to fire Powell because of renovation cost overruns at the Fed's Washington headquarters. 

The yield on benchmark U.S. 10-year notes rose 0.6 basis point to 4.429%, from 4.423% late on Friday.

The 30-year bond yield rose 1.6 basis points to 4.9729% from 4.957% late on Friday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.4 basis points to 3.9%, from 3.914% late on Friday.

Besides earnings season, investors are also waiting for U.S. consumer price data for June, due on Tuesday, and will monitor for any upward pressure from tariffs.

They will also watch for any tariff impact to supply-chain costs in producer price and import price figures also due this week, along with a view of consumer health in retail sales data.

In currencies, the euro was down 0.16% versus the U.S. dollar at $1.167 while against the Japanese yen, the dollar strengthened 0.22% to 147.72.

The Mexican peso weakened 0.39% versus the dollar at 18.719, with Mexican President Claudia Sheinbaum on Monday hitting back at U.S. criticism that her government was not doing enough to combat fentanyl trafficking. She called for the U.S. to do more to arrest drug traffickers on its own turf and stop the flow of weapons south across the border.

Sterling was down 0.5% at $1.3432 after Bank of England Governor Andrew Bailey said uncertainty weighs on growth expectations, in a letter to G20 finance ministers and central bank governors, urging vigilance against the risk of disruptive market moves.

Oil prices fell as investors worried about U.S. trade policy and after Trump gave Russia 50 days to avoid new sanctions and threatened sanctions on buyers of Russian oil.

U.S. crude settled down 2.15% or $1.47 at $66.98 a barrel and Brent finished at $69.21 per barrel, down 1.63%, or $1.15.

Bitcoin was last up 0.67% at $119,924.23 after earlier crossing the $120,000 level for the first time.

Gold prices eased after hitting a three-week peak on Monday with attention on trade talks and upcoming U.S. economic data, while silver pared gains after hitting its highest level in almost 14 years earlier in the day.

Spot gold fell 0.17% to $3,349.80 an ounce. U.S. gold futures fell 0.15% to $3,351.00 an ounce. Spot silver was flat at $38.36 per ounce, after earlier hitting its highest level since September 2011.

(Reporting by Sinéad Carew in New York, Nell Mackenzie in London and Wayne Cole in Sydney; Editing by Christopher Cushing, Sharon Singleton, Alison Williams and Matthew Lewis)