(Updates prices to late afternoon after oil settlement)

*

US stock index trading is choppy even with Meta, Microsoft ( MSFT )

boost

*

Dollar rises against yen as BOJ holds rates steady, ups

inflation forecast

*

Mexico's peso gains on tariff news, investors await August

1

tariff deadline

By Sinéad Carew and Alun John

NEW YORK/ LONDON, July 31 (Reuters) - The U.S. dollar

index rose modestly on Thursday while MSCI's global equities

gauge fell as stronger-than-expected megacap earnings reports

were balanced against signs of rising inflation while investors

were anxious ahead of U.S. President Donald Trump's August 1

deadline for trade agreements.

Trump gave Mexico a 90-day reprieve from higher tariffs to

negotiate a broader trade deal but was expected to issue higher

final duty rates for most other countries as the clock wound

down on the Friday deadline.

U.S. Treasury yields had briefly pared declines in choppy

trading earlier in the day after data showed that U.S. inflation

increased in June as tariffs on imports started raising the cost

of some goods, supporting economists' expectations that price

pressures would pick up in the second half of the year.

Thursday's data also showed fewer-than-expected Americans

applied for unemployment benefits while second-quarter U.S.

labor costs increased slightly more than expected on a pick-up

in wage growth.

The Federal Reserve kept rates steady on Wednesday, and

Chair Jerome Powell said that the central bank needed to wait

for more data before deciding whether to adjust rates in

September, drawing further criticism from Trump on Thursday.

But while Powell's comments had sent equities lower on

Wednesday, indexes saw some support on Thursday from

better-than-expected results out of Microsoft ( MSFT ) and Meta

Platforms ( META ).

With the economic data appearing to support the Fed's more

hawkish stance and an anxious wait for Friday's payroll report

and Trump's tariff deadline, investors had an awful lot to

handle this week, said Kevin Gordon, senior investment

strategist at Schwab.

"This is one of those weeks where it's almost too much

information to digest, so the market is ignoring it all and

staying in a tight range," said Gordon. However, he noted that

megacap strength was countering weakness elsewhere in the market

including in small cap companies, which have less latitude to

cope with higher prices.

"You really only have communications services and parts of

technology that are holding you up today. Breadth is generally

pretty weak," the strategist said.

On

Wall Street

, indexes lost some steam as the session progressed. At 2:41

p.m. the Dow Jones Industrial Average

fell 110.45 points

, or

0.25

%, to

44,349.01

, the S&P 500

rose 4.11 points

, or

0.06

%, to

6,366.77

and the Nasdaq Composite

rose 75.39 points

, or

0.35

%, to

21,205.06

.

MSCI's index of stocks across the globe

fell 2.49 points

, or

0.27

%, to

931.84 and e

arlier the pan-European STOXX 600 index finished down

0.75%,

at a more than one-week low. European investors were

disappointed by corporate earnings reports from the likes of

Sanofi and Ferrari, while beverage makers slid as they were

faced with a 15% U.S. tariff.

In currencies, the dollar was a mixed bag. The dollar index

, which measures the greenback against a basket of

currencies including the yen and the euro, rose 0.16% to 99.95.

The Mexican peso strengthened 0.34% versus the dollar at

18.827 after the trade announcement.

The euro was up 0.23% at $1.143 but against the

Japanese yen, the dollar strengthened 0.82% to

150.71. The Bank of Japan held interest rates steady and

increased its inflation forecast.

The Korean won weakened 0.21% against the

dollar after rising earlier following Trump's announcement that

the U.S. would charge a 15% tariff on imports from South Korea,

which would in return invest $350 billion in U.S. projects and

purchase $100 billion in U.S. energy products.

In Treasuries, the yield on benchmark U.S. 10-year notes

fell 1.8 basis points to 4.36%, from 4.378% late on

Wednesday while the 30-year bond yield fell 2.7

basis points to 4.8857%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

rose 0.8 basis points to 3.945%, from 3.937% late on Wednesday.

In oil markets, prices fell 1% after rising in each of the

prior three sessions as investors considered the extension of an

existing trade deal between the U.S. and Mexico and a surprise

build in U.S. crude stocks put pressure on prices.

U.S. crude settled down 1.06%, or 74 cents at $69.26

a barrel while Brent settled at $72.53 per barrel, down

0.97%, or 71 cents on the day.

Gold prices rose as traders turned to the safe-haven asset

on tariff uncertainty. Spot gold rose 0.62% to $3,294.89

an ounce.