GLOBAL MARKETS-Global stocks pare gains as geopolitical tensions rattle markets
Adds oil, gold settlement prices
By Herbert Lash
NEW YORK, Nov 15 (Reuters) - Stocks pared gains and the dollar rebounded against the euro after media reports that Russian missiles killed two people in Poland, a strike that raised fears the -month Ukraine war could escalate.
The Dow Industrials straddled break-even and the dollar also see-sawed to trade little changed as firefighters reportedin a village in eastern Poland the border with Ukraine, Reuters reported.
Other media said the deaths were due to missiles fired in what Kyiv said was the heaviest wave of strikes since Russia invaded Ukraine in February.
The White House said it could confirm the reports while Russia's defence ministry denied the reports, describing them as "a deliberate provocation aimed at escalating the situation".
The market was overstretched after U.S. consumer and producer price data last week and on Tuesday suggested inflation was coming off its peak, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
"The market is particularly sensitive that Ukraine has taken back more territory that Russia had captured after the war began," Chandler said.
The strike in Poland, if confirmed, is reminiscent of U.S. bombs that killed three people in the Chinese Embassy in Belgrade in 1999, he said.
"It did trigger a war. It was a tragic accident. This is along those same lines," Chandler said.
Stocks had rallied and bond yields slid further early on Tuesday after the Labor Department reported thatjust 0.2% in October.
On an annualised basis, PPI rose 8.0% after climbing 8.4% the previous month. Economists polled by Reuters forecast monthly PPI rising 0.4% and advancing 8.3% year-on-year.
The reading was better than expected and bolstered the risk-off mood sparked last week by cooler-than-expected data on U.S. consumer prices that gave investors hope the Federal Reserve can curb its aggressive interest rate hikes to tame inflation.
"The market is sniffing out the end of the Fed rate hike cycle," said Peter Duffy, chief investment officer of credit at Penn Capital Management Co LLC in Philadelphia.
"The market is taking a big sigh of relief because the Fed has had to talk so tough. As soon as these can start coming down, even if it's a slow walk down in inflation, the market will be relieved."
Fed funds futures showed a further drop from above 5% last week in expectations for the U.S. central bank's target rate, pricing in a peak at 4.9% May and June.
The likelihood the Fed hikes 50 basis points in December rose to a 91% probability, up from 71.5% last week. FEDWATCH
MSCI's gauge of stocks across the globe .MIWD00000PUS gained 1.19%, while its emerging markets index .MSCIEF rose 2.20%.
On Wall Street, the Dow Jones Industrial Average .DJI rose 0.33%, the S&P 500 .SPX gained 1.06% and the Nasdaq Composite .IXIC added 1.74%.
Big moves in the dollar, among other assets, suggested investors were dramatically changing their positions after the CPI and PPI reports, Chandler said.
The euro EUR= was up 0.48% to $1.0375 and the yen strengthened 0.60% versus the dollar at 139.04.
The benchmark 10-year Treasury yield US10YT=RR fell to a six-week low of 3.758% and was last down 7.1 basis points to 3.796%. The 10-year has fallen 30 basis points since Thursday.
Chinese and Hong Kong stocks rallied overnight as investors digested China's COVID-19 policy adjustments, a property sector rescue package, and a cooling in tensions between the U.S. and China.
Beijingsome of its strict COVID rules, though there has been a in some cities this week.
Hong Kong's Hang Seng Index .HSI surged 4.11% overnight. The index is up 25% for the month while China's CSI 300 .CSI300 has gained 10% in that time.
U.S. President Joe Biden and Chinese President Xi Jinpingon Monday in Bali on the sidelines of the G20 gathering. Investors welcomed the two countries' pledge of more frequent communications.
Data out on Tuesday showed that the Britishin September. German business sentiment saw in the closely watched ZEW survey.
U.S. crude futures CLc1 settled up $1.05 at $86.92 a barrel, while Brent futures LCOc1 rose 72 cents to settle at $93.86.
U.S. gold futures GCv1 settled little changed at $1,776.80 an ounce.
Bitcoin BTC=BTSP rose 1.92% to $16,907.00, but remained around 20% lower for the month. The collapsed FTX crypto exchange in bankruptcy filings released on Tuesday.
(Reporting by Herbert Lash, additional reporting by Harry Robertson; Editing by Bradley Perrett, Simon Cameron-Moore, Ken Ferris, Emelia Sithole-Matarise and Susan Fenton)
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