GLOBAL MARKETS-Sterling tumbles on hard Brexit worries; stocks slip

(Updates with U.S. market; changes byline, dateline from
previous LONDON)
* 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 on Monday
touched its lowest against the dollar since early 2017 after
Prime Minister Boris Johnson's government said it now assumed
there would be a hard divorce from the EU, while stocks dipped
globally after last week touching their highest in five months.
The dollar index edged up and touched its highest since May
31 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, 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 $1.2216, down 1.32% on
the day.
"Political risk is finally getting priced. 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 0.16%, with the euro EUR= up
0.03% to $1.1128.
The Japanese yen weakened 0.20% versus the greenback at
108.91 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, with a 1-in-4 chance of a half-point
move.
On Wall Street, tech stocks weighed the most on the S&P 500
in the run-up to the sector's earnings reports, while the Fed
remained as the main market catalyst.
"The key question facing investors now is whether the Fed
can get away with a small number of insurance cuts or whether it
will be pushed towards a more fundamental loosening of policy,"
Neil Shearing, group chief economist at Capital Economics, said
in a note.
The Dow Jones Industrial Average .DJI rose 71.48 points,
or 0.26%, to 27,263.93, the S&P 500 .SPX lost 5.43 points, or
0.18%, to 3,020.43 and the Nasdaq Composite .IXIC dropped
59.53 points, or 0.71%, to 8,270.68.
The pan-European STOXX 600 index .STOXX rose 0.14% and
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.19%.
Emerging market stocks lost 0.43%. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.57%
lower, while Japan's Nikkei .N225 lost 0.19%.
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 CLcv1 rose 0.27% to $56.35 per barrel and Brent
LCOcv1 was last at $63.39, up 0.03% 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 5/32 in price
to yield 2.065%, from 2.081% late on Friday.
The 30-year bond US30YT=RR last rose 5/32 in price to
yield 2.5943%, from 2.601% late on Friday.
Spot gold XAU= added 0.1% to $1,418.99 an ounce. U.S. gold
futures GCcv1 fell 0.04% to $1,418.70 an ounce.
Copper CMCU3 rose 0.80% to $6,011.00 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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