*

Traders evaluate diplomatic signals between Russia and

Ukraine

*

European defence stocks fall as traders take profit

*

Markets eye Fed's Jackson Hole symposium for policy hints

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Bonds steady after recent selloff

(Updates with close of US stock trading)

By Alun John and Noel Randewich

LONDON/SAN FRANCISCO, Aug 19 (Reuters) - Wall Street

stocks fell, European equities rose and oil edged down on

Tuesday as traders assessed the previous day's White House talks

on the war in Ukraine, and looked ahead to a key meeting of

central bankers.

U.S. President Donald Trump said he hoped Russia's Vladimir

Putin would move forward on ending the war in Ukraine but

conceded the Kremlin leader may not want to make a deal.

On Monday, Trump told Ukrainian President Volodymyr

Zelenskiy the United States would help guarantee Ukraine's

security in any agreement to end Russia's war there, though the

extent of any assistance was not immediately clear.

Declines in Nvidia ( NVDA ) and other heavyweight artificial

intelligence stocks pulled the S&P 500 down 0.6% and the

Nasdaq down 1.5%. The Dow Jones Industrial Average

ended roughly flat after briefly touching an all-time

high.

Europe's broad STOXX600 index rose 0.7%,

outperforming Asian stocks, which fell slightly.

Europe's gains were capped by declines in defence names,

with the STOXX Europe Total Market Aerospace & Defense index

down 2.6%, as traders saw the talks as a chance to

take profit in the sector after a strong run.

With any breakthrough in talks, "I think European stocks are

likely the biggest winners, and within that framework, I think

industrial companies, construction for rebuilding materials, and

financial companies," said Michael Arone, chief investment

strategist at State Street Investment Management.

Losers could include shares in energy and defence after

their recent gains, he said.

Energy markets were also assessing the chance of an end of

the war in Ukraine, and oil prices fell on speculation that

progress in the talks could lead to the lifting of sanctions on

Russian crude, boosting supply.

The moves were not dramatic though, and some analysts said

developments were unlikely to jolt oil and gas markets

significantly. Brent crude futures were down 57 cents at 66.06 a

barrel, with U.S. crude down 77 cents at $62.65.

EYES ON THE FED

The other main event for markets this 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

U.S. central bank's policy framework.

His remarks will be closely watched as the Fed grapples with

sticky inflation and signs of slowing growth. Futures markets

imply at least two 25 basis point rate cuts this year,

reflecting a view that the Fed will not view inflation as a

long-term problem.

"There's an anxiety about Powell's comments at Jackson

Hole," said Ross Mayfield, investment strategist at Baird

Private Wealth Management. "Some investors fear the Fed is going

to be a bit behind the curve and higher interest rates have a

big impact on growth stocks."

Trump has been pressuring the Fed to cut rates dramatically,

and has publicly speculated about replacing Powell before his

term ends next year.

"The question is to what degree is the Fed happy to ignore

the inflation data because they think it is distorted by

tariffs," said Ian Samson, portfolio manager at Fidelity

International.

"If you look out one year, you're not going to have Powell

as Fed chair, there are a couple of governors to replace, so the

balance is clearly going towards people who are willing to look

through tariffs, and thus continue to lower interest rates."

Such a scenario would likely bode well for equities, help

shorter-dated government bonds, and weigh on the dollar, though

the impact for longer-dated bonds is less clear, said Samson,

adding that he was largely avoiding the long end of the U.S.

yield curve.

The S&P 500 will end 2025 just below current near-record

levels, reflecting tempered optimism amid ongoing concerns over

the economic impact of Trump's global tariffs and uncertainty

surrounding Fed's rate cuts, according to a new Reuters poll.

Longer-dated yields have been rising worldwide in recent

months. German and British 30-year yields have tested

multi-decade highs, and the latter rose sharply late on Monday.

Bond markets were calmer on Tuesday. U.S., German and

British government bond yields all fell across their respective

curves, with the benchmark 10-year Treasury yield down 3 basis

points at 4.31%.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

was last up 0.15% on the day.

Gold dipped 0.4% to $3,317.71 an ounce.