Global shares muted as prospect of United States cut fades

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U.S. Treasury yields have risen to three-week highs and the dollar is up more than 1% this month after jobs data led money markets to pare back expectations for rate cuts at the Federal Reserve's July meeting.

Lurking in the background, U.S. and Chinese trade officials held "constructive" talks on trade by phone on Tuesday, White House economic adviser Larry Kudlow said.

Powell is set to testify Wednesday in what will be his first extensive public appearance since a strong June jobs report dampened expectations for aggressive Fed action. NZD/USD had a quick pop lower in Asian trading to 0.6568 on a large sell order before recovering to stick around 0.6590-10 levels in Europe. The Nasdaq composite edged up less than 0.1%, while the Russell 2000 index of smaller company stocks dropped 0.2%.

Expectations for a 50 basis point (bps) rate cut at a Fed meeting later this month have evaporated, but investors still expect a 25 bps cut due to weak inflation and worries about growing business fallout from the U.S. United States futures pointed to a lower opening for Wall Street, with E-Minis for the S&P500 at -0.2 percent. Moreover, yields on US Treasury notes and bonds look to be rising again.

There was some positive news on the protracted China-US trade war, with White House Economic adviser Larry Kudlow confirming that top US and Chinese delegates will meet this week for trade talks.

The Turkish lira stabilized after falling sharply on Monday in the wake of President Tayyip Erdogan's decision to dismiss the central bank governor.

However, Ozkardeskaya added that "mounting political pressure" of Powell and the Fed to cut interest rates was one more reason for the chairman to remain "as ambiguous as possible" on the central bank's policy.

More news: House prepares subpoenas of top White House officials in Trump probe

"The market still expects the Fed to cut rates later this month".

With the initial reaction to Powell's statement, the US Dollar Index turned south and was last down 0.25% on the day at 97.25. The euro was little changed at $1.1209, inching up from $1.1203.

Geopolitics may be in focus this week following news on Sunday that Iran will boost its uranium enrichment, in breach of the 2015 nuclear deal.

Data on British gross domestic product and industrial output are due on Wednesday, while the Bank of England will release its financial stability report on Thursday, which could help traders gauge whether the BoE will take a more dovish view of the economy.

Meanwhile, the pound fell to a low of 1.2444 early on in the session as EUR/GBP took a peek above the 0.9000 handle but the quid regained some poise with cable testing a high of 1.2495 before retreating to near 1.2470 now - unchanged levels.

In commodity markets, Brent crude futures were down 0.09 percent to $64.18.

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