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US, European stocks steady as Ukraine talks continue

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Oil rises as US, Ukraine, Europe hold talks

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Dollar nudges higher before Jackson Hole meeting

(Adds new comment, Trump/Zelenskiy meeting outcome, updates

prices)

By Gertrude Chavez-Dreyfuss and Samuel Indyk

NEW YORK/LONDON, Aug 18 (Reuters) - Wall Street and

European shares ended flat to modestly lower on Monday ahead of

a key central bank gathering later in the week that likely will

determine the future path of U.S. interest rate policy.

Investors also focused on the meeting between Ukraine's

Volodymyr Zelenskiy and President Donald Trump. The U.S. leader

said on Monday the United States would help Europe in providing

security for Ukraine as part of any deal to end Russia's war in

Ukraine. Both heads of state are also pushing for a trilateral

meeting with Russian President Vladimir Putin.

Financial markets, however, reacted little to news out of

the Ukraine talks.

"I don't really see anything big in this or anything new or

tangible," said Marc Chandler, chief market strategist at

Bannockburn Forex in New York.

"For Ukraine and the EU, their argument is basically Russia

took Crimea and it wasn't good enough for them. Now they're

trying to take more of Ukraine. And even now with all these

negotiations going on, Russia is trying to make a bigger

offensive push."

The Zelenskiy meeting followed the Alaska summit with Putin,

which did not result in an agreement. Trump after the Alaska

talks with Putin appeared more aligned with Moscow on seeking a

full peace deal instead of a ceasefire first.

The S&P 500 closed little changed on Monday, but

remained within striking distance of its all-time high hit on

Friday.

The pan-European STOXX 600 index ended the day

slightly higher after reaching its strongest level since March

last week, which left the MSCI All Country World Index

also slightly lower, but not far from its record

high touched on Friday.

Earlier in the Asian session, indexes in Japan and Taiwan

hit record peaks, while a gauge of Chinese stocks

reached its highest level in a decade.

Another key focus for the week is the 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.

U.S. rate futures market has priced in an 85% chance of a

quarter-point rate cut at the Fed's meeting on September 17, and

is pricing further easing by December.

"Fed Chair Jerome Powell will likely signal Friday that

risks to employment and inflation are becoming more balanced,

which would imply lowering policy rates toward neutral," wrote

Andrew Hollenhorst, chief U.S. economist at Citi in a research

note.

"But he will stop short of committing to a cut next month,

awaiting jobs and inflation data for August."

The prospect of lower borrowing costs globally has overall

underpinned stock markets, and Japan's Nikkei climbed to

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

shares outside Japan, ended flat on Monday

having scaled a four-year peak last week.

In Europe, Germany's DAX eased 0.2%. Britain's FTSE

was up 0.2%.

ROBUST EARNINGS

In the United States, the rally in stocks has 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.

This week's results will provide some color on the state of

consumer spending in the country, with Home Depot, Target,

Lowe's and Walmart all reporting.

In bond markets, the yield curve steepened, with the gap

between two-year and 10-year Treasury yields hitting 57.8 basis

points. That's the largest gap since mid-July.

Rates on the long end of the curve rose much faster than

those on the front end, suggesting higher inflation

expectations.

In the FX market, wagers on more Fed easing have weighed on

the dollar, which dropped 0.3% against a basket of currencies on

Monday and last stood at 98.114.

The dollar rose 0.4% versus the yen to 147.82,

while the euro fell 0.3% to $1.1667.

In commodity markets, gold was flat at $3,333 an ounce

after losing 1.9% last week.

Oil prices rose in the aftermath of the meeting between

Trump and Zelenskiy, which did not really yield meaningful

results. Brent was up 1% at $66.52 a barrel, while

U.S. crude stood at $63.34 per barrel, up 0.9%.