By Tom Wilson
LONDON, Aug 9 (Reuters) – Stocks fell and the dollar slipped from recent highs on Tuesday, as investors eyed U.S. inflation data due on Wednesday that is likely to hint at a possible aggressive rise in interest rates by the Federal Reserve.
* The stakes are high with the report on July US consumer prices on Wednesday, after last week’s unexpectedly strong jobs data boosted expectations of a sharp rise in interest rates to make in the face of rising inflation.
* The STOXX 600 index fell 0.6%, after posting its best session in almost two weeks on Monday, and German stocks fell 0.7%. Mining and automakers led declines on Tuesday, after being in the sectors that gained the most the previous day.
* Wall Street futures pointed to slight gains.
* On Monday, Wall Street closed mostly flat after last week’s jobs data reinforced expectations that the Federal Reserve will crack down on inflation, while an earnings warning from chipmaker Nvidia reminded investors of the slowdown in the US economy.
* The dollar was also holding just below its recent high, with traders wary of a surprise that could put further upward pressure on interest rates. Against a basket of currencies, the dollar was slightly lower and traded at 106.14.
* The MSCI World Stock Index, which tracks shares in 47 countries, fell 0.1%.
* Earlier, the MSCI Asia-Pacific stock index excluding Japan closed flat, after giving up modest gains. Japan’s Nikkei fell 0.95%, hurt by heavyweights’ weak quarterly earnings and lower expectations for the video game market.
* On Monday, a New York Fed survey showed consumer inflation expectations fell sharply in July.
* “That will be music to the Fed’s ears, as if that trend continues, it means the Fed may not have to be as aggressive in raising rates,” Deutsche Bank analysts wrote. “One of their big fears is that rising inflation expectations will lead to a self-fulfilling prophecy of higher actual inflation.”
* Brent crude reversed earlier losses and rose a dollar a barrel to $97.41 on news that Russia had suspended oil exports through the southern section of the Druzhba pipeline.
* Oil prices had continued their recent pullback after suffering their biggest weekly decline since April 2020, on concerns over stagnant global demand as central banks tighten policy.
(Reporting by Tom Wilson in London; additional reporting by Julie Zhu in Hong Kong; Editing in Spanish by Ricardo Figueroa)