GLOBAL MARKETS-U.S. yield curve flattens after ECB move; stocks inch up

* S&P 500 slightly higher in early afternoon trading
* Trump tweets on lack of progress in Mexico talks
* Mexican peso hit by Fitch downgrade

(Updates with European stocks close)
By Caroline Valetkevitch
NEW YORK, June 6 (Reuters) - The U.S. Treasury yield curve
flattened on Thursday as the European Central Bank committed to
leaving interest rates steady into the first half of 2020, while
major world stock indexes mostly edged higher.
The ECB's move was less aggressive than what some traders
had expected and led to selling of shorter-dated German
government debt, which in turn spilled over to shorter U.S.
Treasury maturities, traders and analysts said.
Much of the Treasury yield curve flattened, coming off its
steepest level in seven months the day before. The gap between
two-year and 10-year yields US2US10=TWEB narrowed by 2.6 basis
points to 25.10 basis points. German 10-year yields DE10YT=RR tumbled to record low of
-0.240% before retracing to -0.232%. Benchmark 10-year Treasury
notes US10YT=RR last rose 6/32 in price to yield 2.1019%, from
2.123% late on Wednesday.
"In Europe, the selling came with some pricing in of an ECB
rate cut," said Subadra Rajappa, head of U.S. rates strategy at
SG Corporate & Investment Banking in New York.
U.S. stocks were higher in early afternoon trading, with
continued hopes of an interest rate cut from the Federal Reserve
helping to support the market. Limiting the day's gains were escalating trade tensions.
U.S. President Donald Trump said he would decide on more China
tariffs "probably right after the G20," on June 28 and 29. That
followed his overnight threat to put tariffs on "at least"
another $300 billion worth of Chinese goods. The latest flare-up in tensions follows mixed economic data
that rekindled worries about the health of the world's top
economies but also spurred expectations that central banks could
ride to the rescue.
The Dow Jones Industrial Average .DJI rose 73.77 points,
or 0.29%, to 25,613.34, the S&P 500 .SPX gained 6.18 points,
or 0.22%, to 2,832.33 and the Nasdaq Composite .IXIC dropped
3.66 points, or 0.05%, to 7,571.81.
The pan-European STOXX 600 index .STOXX lost 0.02% and
MSCI's gauge of stocks across the globe .MIWD00000PUS gained
0.12%.
Mexico's peso suffered a double whammy of trade woes with
the United States and the downgrade of the country's credit
rating. The Mexican peso fell 0.81% versus the U.S. dollar to 19.75.
The dollar index .DXY fell 0.46%, with the euro EUR= up
0.66% to $1.1293.
Oil futures were largely steady, after falling to near
five-month lows in the previous session. U.S. crude CLcv1 fell 0.23% to $51.56 per barrel.

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