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U.S., European stocks steady as traders await cues on

geopolitics, Fed

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Oil little changed as Ukraine's Zelenskiy heads to

Washington

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Dollar, nudges higher before Jackson Hole

(Updates after Wall Street open)

By Samuel Indyk and Wayne Cole

LONDON, Aug 18 (Reuters) - U.S. and European shares

started the week on a cautious footing ahead of a potentially

eventful week for U.S. interest rate policy, as attention turned

to Washington where Ukraine's Volodymyr Zelenskiy and European

leaders will meet Donald Trump.

The S&P 500 was little changed in early trade on

Monday and remained close to its all-time high hit on Friday.

The pan-European STOXX 600 index was down about

0.1% after hitting its highest level since March last week,

which left the MSCI All Country World Index down

0.15%, also within touching distance of its record high from

Friday.

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 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 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 0.2%. Britain's FTSE

was down 0.1%.

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. "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.

EYES ON FED POLICY

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 slightly on the yen at 147.85,

while the euro slipped to $1.1673 after adding 0.5%

last week.

In commodity markets, gold bounced 0.1% to $3,340 an ounce

after losing 1.9% last week.

Oil prices were flat as Trump backed away from threats to

place more restrictions on Russian oil exports.

Brent was down just 0.1% at $65.79 a barrel, while U.S.

crude stood at $62.71 per barrel.