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European stocks ease as traders await cues on geopolitics,

Fed

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Oil market steady as Ukraine's Zelenskiy goes to

Washington

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Dollar, yen nudge higher before Jackson Hole

(Updates for late morning European trading)

By Samuel Indyk and Wayne Cole

LONDON, Aug 18 (Reuters) - European shares wobbled on

Monday ahead of what is likely to be an eventful week for U.S.

interest rate policy, as investor attention turned to Washington

where Ukraine's Volodymyr Zelenskiy and European leaders will

meet Donald Trump.

The pan-European STOXX 600 index was down about

0.2% after hitting its highest level since March on Friday,

while the MSCI All Country World Index hovered

close to the record high touched last week.

Earlier in the Asian session, indices in Japan and Taiwan

notched record peaks, while a gauge of Chinese stocks

reached its highest level in a decade.

Investors were bracing for U.S. President Trump's meeting

with Ukrainian President Zelenskiy and European leaders later on

Monday to discuss the next steps to end the war in Ukraine,

after Trump's summit with Russian President Vladimir Putin in

Alaska on Friday.

While the summit did not result in an agreement, Trump

afterwards appeared more aligned with Moscow on seeking a full

peace deal with Ukraine instead of a ceasefire first.

"It will be a bit of a muted start to the week," said Lars

Skovgaard, senior investment strategist at Danske Bank, after

the Russia-U.S. talks on Friday.

Skovgaard added that whether or not a deal is reached,

focus was already turning to the Kansas City Federal Reserve's

August 21-23 Jackson Hole symposium, where Chair Jerome Powell

is due to speak on the economic outlook and the central bank's

policy framework.

Markets imply around an 85% chance of a quarter-point rate

cut at the Fed's meeting on September 17, and are priced for a

further cut by December.

"We see three rate cuts in the U.S. this year, and slower

GDP growth but no recession," said Mark Matthews, head of

research for Asia at Bank Julius Baer in Singapore. "The

combination of those two should allow the rally to continue."

The prospect of lower borrowing costs globally has

underpinned stock markets, and Japan's Nikkei climbed to

a fresh record high. MSCI's broadest index of Asia-Pacific

shares outside Japan added 0.1%, having scaled a

four-year peak last week.

In Europe, Germany's DAX eased 0.3%. Britain's FTSE

was down 0.1%.

SOLID EARNINGS

S&P 500 and Nasdaq futures eased 0.1%, though

both were near all-time highs.

Valuations have been underpinned by a solid earnings season

as the S&P 500 EPS grew 11% on the year and 58% of companies

raised their full-year guidance.

"Earnings results have continued to be exceptional for the

mega-cap tech companies," said analysts at Goldman Sachs. "While

Nvidia has yet to report, the Magnificent 7 apparently grew EPS

by 26% year/year in 2Q, a 12% beat relative to consensus

expectation coming into earnings season."

This week's results will provide some colour on the health

of consumer spending with Home Depot, Target, Lowe's and Walmart

all reporting.

In bond markets, the chance of Fed easing is keeping down

short-term Treasury yields while the longer end is pressured by

the risk of stagflation and giant budget deficits, leading to

the steepest yield curve since 2021.

European bonds also have been pressured by the prospect of

increased borrowing to fund higher defence spending, pushing

German and French long-term yields to their highest since 2011.

Wagers on more Fed easing have weighed on the dollar, which

dropped 0.4% against a basket of currencies last week to last

stand at 97.858.

The dollar was up 0.2% on the yen at 147.42, while

the euro slipped to $1.1682 after adding 0.5% last

week.

In commodity markets, gold bounced 0.4% to $3,349 an ounce

after losing 1.9% last week.

Oil prices edged higher as White House trade adviser Peter

Navarro said India's purchases of Russian crude were funding

Russia's war in Ukraine and had to stop, even as Trump backed

away from threats to place more restrictions on Russian oil

exports.

Brent was up 0.4% at $66.08 a barrel, while U.S.

crude rose 0.5% t0 $63.11 per barrel.