GLOBAL MARKETS-Sterling slumps on 'no-deal Brexit' worries; stocks dip

(Updates after U.S. market close)
* Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
* Dollar index hits two-month high

By Rodrigo Campos
NEW YORK, July 29 (Reuters) - The British pound touched its
lowest level in over two years against the dollar after Prime
Minister Boris Johnson said a hard divorce from the EU was in
the cards, while stocks dipped globally with Wall Street backing
off record highs.
The dollar index edged up and touched its highest since late
May as markets counted down to a likely cut in U.S. interest
rates this week, with much riding on whether the Federal Reserve
signals more cuts will follow.
Sterling fell to a 28-month low of $1.2213 GBP= as
Johnson's cabinet prepared the ground for a "no-deal" British
exit from the European Union on Oct. 31, which many investors
say would tip Britain into a recession and inject unwanted
uncertainty into financial markets. GBP/ The pound GBP= was last trading at $1.2223, down 1.27% on
the day.
"There is a realization the market had not fully priced the
increased chances of a no-deal Brexit," said Claire Dissaux,
head of global economics and strategy at Millenium Global
Investments.
The dollar index .DXY rose 0.03%, with the euro EUR= up
0.17% to $1.1144.
The Japanese yen weakened 0.09% versus the greenback at
108.79 per dollar.
A stronger-than-expected U.S. gross domestic product report
on Friday lead some investors to doubt whether the Fed will
continue easing this year after its Wednesday meeting.
Interest rate futures are fully priced for a quarter-point
rate cut from the Fed on Wednesday, with a 1-in-4 chance of a
half-point move.
On Wall Street, Amazon and Facebook weighed down the S&P 500
while Apple rose a day ahead of earnings. Absent company news,
the Fed remained as the main market catalyst.
"Apple's results will be a good read into trade and the
situation with China and if Apple has a good number it would be
a stabilizing force for the technology sector," said Craig
Hodges, portfolio manager with Hodges Funds in Dallas, Texas.
The Dow Jones Industrial Average .DJI rose 28.9 points, or
0.11%, to 27,221.35, the S&P 500 .SPX lost 4.89 points, or
0.16%, to 3,020.97 and the Nasdaq Composite .IXIC dropped
36.88 points, or 0.44%, to 8,293.33.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.16% and emerging market stocks lost 0.28%. MSCI's broadest
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS
closed 0.54% lower, while Japan's Nikkei .N225 lost 0.19%.
The pan-European STOXX 600 index .STOXX earlier rose
0.03%.
Investors were also keeping an eye on U.S.-China trade
talks. U.S. and Chinese negotiators meet in Shanghai this week
for their first in-person talks since a G20 truce last month,
but expectations for a breakthrough are low. Oil futures meandered throughout the session but ended
decidedly in the black as Fed easing expectations more than
offset the reaction to "constructive" Iran talks over the
weekend. U.S. crude CLc1 rose 1.51% to $57.05 per barrel and Brent
LCOc1 was last at $63.89, up 0.68% on the day.
"Today's kickoff to some renewed trade negotiations between
U.S. and China will likely inspire some modest price support,"
Jim Ritterbusch of Ritterbusch and Associates said in a note.
"However, the mid-week Fed decision and associated commentary
could prove to be this week's larger driver of oil pricing."
U.S. Treasury yields were lower across the board with
investors focused on the widely expected interest rate cut by
the Fed later this week.
"People say the Fed could go 50 basis points, but I think
that's not going to happen," said Stan Shipley, fixed income
strategist at Evercore ISI in New York. "The question is what
they are going to say about future cuts."
Benchmark 10-year notes US10YT=RR last rose 6/32 in price
to yield 2.0598%, from 2.081% late on Friday.
The 30-year bond US30YT=RR last rose 10/32 in price to
yield 2.5871%, from 2.601% late on Friday.
Spot gold XAU= added 0.6% to $1,426.31 an ounce. U.S. gold
futures GCcv1 gained 0.49% to $1,426.20 an ounce.
Copper CMCU3 rose 0.87% to $6,015.00 a tonne.

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Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
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