GLOBAL MARKETS-Brexit worries knock sterling; stocks slip

(Updates prices, changes comment)
* Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
* Dollar index hits 2-month high

By Rodrigo Campos
NEW YORK, July 29 (Reuters) - The British pound touched its
lowest against the dollar in over two years after Prime Minister
Boris Johnson said a hard divorce from the EU was in the cards,
while stocks dipped globally on Monday after last week hitting
their highest in five months.
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 October 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 $1.2225, down 1.25% 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 Millennium Global
Investments.
The dollar index .DXY rose 0.05%, with the euro EUR= up
0.15% to $1.1142.
The Japanese yen weakened 0.12% versus the greenback at
108.82 per dollar.
A stronger-than-expected U.S. gross domestic product report
on Friday led 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 Dow component 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.
The Dow Jones Industrial Average .DJI rose 50.5 points, or
0.19%, to 27,242.95, the S&P 500 .SPX lost 5.68 points, or
0.19%, to 3,020.18 and the Nasdaq Composite .IXIC dropped
47.43 points, or 0.57%, to 8,282.78.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.17% and emerging market stocks lost 0.34%. MSCI's broadest
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS
closed 0.53% lower, while Japan's Nikkei .N225 lost 0.19%.
The pan-European STOXX 600 index .STOXX 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 zigzagged in and out of positive territory,
whipsawed by Fed expectations and the reaction to talks between
Iran and some signatories of its nuclear agreement over the
weekend. U.S. crude CLc1 rose 1.23% to $56.89 per barrel and Brent
LCOc1 was last at $63.72, up 0.41% on the day. U.S. Treasury yields were lower across the board in line
with most major sovereign debt markets amid global economic
uncertainty, 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 9/32 in price
to yield 2.0511%, from 2.081% late on Friday.
The 30-year bond US30YT=RR last rose 17/32 in price to
yield 2.5761%, from 2.601% late on Friday.
Spot gold XAU= added 0.2% to $1,421.71 an ounce. U.S. gold
futures GCcv1 gained 0.16% to $1,421.50 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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