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Wall Street follows european stocks lower

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US producer price data unexpectedly unchanged

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Sterling rises as UK CPI unexpectedly rises

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Oil prices fall while gold rises

By Sinéad Carew and Elizabeth Howcroft

NEW YORK/PARIS, July 16 (Reuters) -

Markets turned volatile on Wednesday with equities losing

steam, the dollar selling off sharply and gold prices spiking

higher on a report that U.S. President Donald Trump is looking

to fire the Federal Reserve chair, though investors pared back

bearish bets when Trump said he was not planning to do so.

U.S. Treasury two-year yields dropped sharply after Bloomberg

reported that Trump is likely to fire Federal Reserve Chair

Jerome Powell soon, citing an unidentified White House official.

Such reports are not true, Trump said, adding that it was

"highly unlikely" that Powell would be fired.

Trump did talk with some Republican lawmakers about firing

Powell, he said, but said he is more conservative about his

approach to the question than they are.

The U.S. Federal Reserve has been keeping interest rates

steady as it monitors the inflationary impact from tariffs,

which Powell expects to become clearer in the summer.

But Trump has railed against Powell for months about not cutting

rates sooner, prompting investor concern about whether the

central bank's independence could be eroded.

"Given the passage of the one Big Beautiful Bill, given the very

dramatic increase in the deficit and the substantial increase in

the debt ceiling, we're paying close attention to Treasuries to

see at what point does the bond market, more broadly, begin to

push back, especially if the independence of the Federal Reserve

is called into question," said Don Calcagni, chief investment

officer at Mercer Advisors.

On Wall Street at 12:07 p.m. the Dow Jones Industrial

Average rose 46.41 points, or 0.11%, to 44,069.70, the

S&P 500 fell 1.51 points, or 0.02%, to 6,242.25 and the

Nasdaq Composite fell 17.99 points, or 0.09%, to

20,659.97.

MSCI's gauge of stocks across the globe

fell 0.75 points, or 0.08%, to 919.50 while the pan-European

STOXX 600 index fell 0.57%,

The reports about Powell overshadowed an unexpectedly tame

inflation reading. U.S. producer prices were unexpectedly

unchanged in June as an increase in the cost of goods due to

tariffs on imports was offset by weakness in services. The

unchanged reading in the producer price index for final demand

last month followed an upwardly revised 0.3% rise in May. This

was after Tuesday's U.S. consumer price data for June pointed

to higher costs for some goods.

"It's very early innings when determining whether or not and

to what extent tariffs are going to impact inflation," said

Calcagni, noting that while investors wait to see where the

Trump administration ultimately sets tariff levels, inflation

numbers are also being muddied by the depletion of goods in

stock at companies which had built up higher than usual

inventories in anticipation of the new import taxes.

In currencies, the dollar index, which measures the

greenback against a basket of currencies including the yen and

the euro, was last down 0.26% to 98.36.

The euro was up 0.33% at $1.1637 while against the

Japanese yen, the dollar weakened 0.49% to 148.14.

Sterling strengthened 0.38% to $1.343. Earlier data

showed that Britain's annual rate of consumer price inflation

unexpectedly rose to its highest in over a year.

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

fell 1.8 basis points to 4.471%, from 4.489% late on

Tuesday while the 30-year bond yield rose 1.3 basis

points to 5.0303%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

fell 5.7 basis points to 3.902%, from 3.959% late on Tuesday.

Oil prices were lower, with Brent crude futures around $68.5 a

barrel, as signs of stronger Chinese crude consumption

were outweighed by investor caution about the wider economic

impact from U.S. tariffs.

U.S. crude fell 0.83% to $65.97 a barrel and Brent

fell to $68.16 per barrel, down 0.8% on the day.

Gold prices added to gains after the Powell reports with the

safe haven commodity bolstered by persistent Middle East

conflict and uncertainty over tariffs.

Spot gold rose 0.66% to $3,344.66 an ounce. U.S. gold

futures fell 0.01% to $3,329.50 an ounce.