A gauge of global shares dropped along with oil prices on Tuesday as investors weighed geopolitical risks as well as impending Nvidia earnings and U.S. inflation data.
Markets are anticipating an imminent start to the Federal Reserve's monetary policy easing, after Chair Jerome Powell said on Friday the central bank was ready to start cutting rates.
All three major U.S. indexes were trading lower, with the benchmark S&P 500 down 0.19% to 5,606.07, the Dow Jones Industrial Average falling 0.01% to 41,235.73, and the Nasdaq Composite dropping 0.53% to 17,633.19.
European stocks were slightly higher, following a late rally in Japan's Nikkei index. MSCI's all-country index of stocks <.MIWD00000PUS > was down 0.14% at 829.02.
Gold hovered above $2,500 per ounce on rate cut expectations and lingering concerns about the Middle East conflict, exacerbated by a major missile exchange between Israel and Hezbollah on Sunday.
Middle East tensions - along with concerns about a potential shutdown of Libyan oil fields - had led to a surge in oil prices of more than 7% over the previous three sessions. However, that rally lost steam on Tuesday, with a slight dip in prices.
"It would be a real shock not to get a (Fed) rate cut in September," said Guy Miller, chief market strategist at Zurich Insurance Group, adding an initial 25 basis point cut was most likely.
"It was also interesting that he didn't really push against the market expectations of 100 plus basis points of rate cuts between now and year-end," Miller added.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.07% to 100.78, with the euro up 0.01% at $1.1162.
A key measure of U.S. inflation due on Friday could further influence market perceptions of how quickly the Fed will act.
Investors were also on edge ahead of Nvidia's earnings report on Wednesday, where anything short of a stellar forecast from the chipmaker could jolt investor confidence in the AI-fuelled rally.
"I think Nvidia will take more importance" than the inflation data, said Michaël Nizard, head of multi-asset at investor Edmond de Rothschild.
"We know that the pace of inflation is going well. We don't know what could be the guidance for this big, big actor in artificial intelligence. This could be a bump for the market."
Also keeping sentiment in check was a move by Canada, following the lead of the United States and European Union, to impose a 100% tariff on imports of Chinese electric vehicles and a 25% tariff on imported steel and aluminium from China.
Oil prices dipped, with Brent crude futures 0.95% lower at $80.66 a barrel, while U.S. crude futures eased 1.1% to $76.57 a barrel.
(Reporting by Chibuike Oguh in New York and Iain Withers in London; Editing by Bernadette Baum)
