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U.S. 10-year Treasury yield hits near 3-month high

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German software firm SAP jumps to record high, defying

broad

weakness

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Investors sell Japan ahead of domestic election

(Updates at 0851 GMT)

By Medha Singh and Tom Westbrook

LONDON/SINGAPORE, Oct 22 (Reuters) - Global stocks

dipped on Tuesday, while bond yields and the dollar traded near

multi-month highs as investors reined in expectations for more

big U.S. interest rate cuts ahead of the U.S. election.

Bucking the trend in the equities market was the European

heavyweight software company SAP, which surged to an

all-time high after raising its full-year targets.

The MSCI All-World index ticked 0.2% lower,

while U.S. futures pointed to another weaker start open

after Monday's drop in the benchmark indices.

"We're getting very close to the U.S. election and the data

in the U.S. has been strong. So there is a question about how

much the Fed can do," said Peter Schaffrik, global macro

strategist at RBC Capital Markets.

The chances of the U.S. Federal Reserve delivering a

quarter-point rate cut at its Nov. 7 meeting have receded to 87%

from near certainty a week ago, according to CME's FedWatch

tool.

A host of data signalling U.S. economic strength have thrown

cold water on bets over another outsized cut, following the

Fed's decision to cut rates by half a point in September.

Adding to the uncertainty was the looming U.S. election,

where former Republican president Donald Trump and Democrat Vice

President Kamala Harris are caught in a tight battle to win over

some of the more competitive states ahead of the Nov. 5 voting

day.

Trump's lead in online betting polls has aided the dollar's

recent rise to a 2-1/2 month high as his proposed tariff and tax

policies could mean stronger inflation and keep U.S. interest

rates higher for longer.

The dollar index was just below that peak at 103.89.

"As neither party holds a clear advantage in any of the key

swing states that could decide the outcome, the race remains too

close for pollsters to call, and we expect volatility to pick up

in the coming weeks amid elevated uncertainty," said Mark

Haefele, chief investment officer, UBS Global Wealth Management.

Political and geopolitical uncertainty kept safe-haven gold

pinned near record levels, up 0.6% at $2,735 an ounce.

Benchmark 10-year Treasury yields rose 2 basis

points to 4.21%, extending a sharp move higher and hitting their

highest since late July.

ASIA TRADE

Investors also took some cash off the table in Japan, which

holds an election on Sunday. Stocks, bonds and the yen have all

fallen in tandem as polls have shown the possibility of the

ruling coalition losing its majority.

Japan's Nikkei ended down 1.3% to touch its lowest

since early October, while the yen hit 151 per dollar

for the first time since July.

"It's a small capital flight out of Japan," said Naka

Matsuzawa, Japan macro strategist at Nomura. More broadly, he

said, markets were starting to speculate on a "red sweep",

delivering Republicans the White House and Congress in November.

Besides the yen, foreign exchange markets steadied after a

session of selling almost everything against the dollar. The

Australian and New Zealand dollars were each up about 0.4% on

the U.S. dollar while the euro and sterling rose 0.1%.

The move pushed sterling just below $1.30, though

traders are wary as Bank of England Governor Andrew Bailey is

due to speak at 1325 GMT and has recently suggested the central

bank can move more aggressively to cut interest rates.

China's markets were pinned well below recent highs, while

traders wait for more details and especially more government

urgency and spending to support the ailing economy.

Oil prices also steadied and Brent crude futures

traded at $74 a barrel, down 0.3% on the day.. China's

oil-demand growth is expected to remain weak in 2025, the head

of the International Energy Agency said on Monday.

A relatively bare data calendar puts extra focus on U.S.

earnings for insight into the economy and markets' mood.

General Motors ( GM ), Texas Instruments Verizon

, Lockheed Martin ( LMT ) and 3M ( MMM ) are among those

reporting on Tuesday.