(Updates prices to US morning trade)

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Euro extends decline after Monday's retreat

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Wall St indexes edge lower up before Fed, mega cap

earnings

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Analysts warn tariffs are drag on EU and US economies

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Oil rises after Trump shortens Russia deadline

By Sinéad Carew and Nell Mackenzie

NEW YORK/LONDON, July 29 (Reuters) - Wall Street indexes

fell modestly while European equities advanced as U.S. investors

awaited earnings reports from megacap companies and the Federal

Reserve's next policy decision, due on Wednesday.

The dollar advanced against major currencies including the

euro, which hit a one-month low and eyed its fourth straight day

of declines as investors sobered up to the fact that the new

U.S.-EU trade deal favoured the United States and did little for

the 27-nation bloc's economic outlook.

Meanwhile, investors were looking to results in the days

ahead from large companies such as Microsoft ( MSFT ), Meta

Platforms ( META ), Apple ( AAPL ) and Amazon ( AMZN ).

And they were also waiting for the Fed's policy statement

and commentary, due on Wednesday afternoon following the U.S.

central bank's two-day meeting.

The Fed is expected to keep interest rates steady pending

more clarity on the impact of tariffs on inflation, even with

constant demands from U.S. President Donald Trump for rate

cuts.

"We're waiting on the technology earnings and the Fed and

what the White House might say about what the Fed does or likely

does not do," said Tim Ghriskey, senior portfolio strategist at

Ingalls & Snyder in New York.

While traders have been betting that the Fed will make its

next rate cut in September, they will be watching for

confirmation from a slew of data this week including inflation

and payroll reports. Canada's central bank also convenes on

Wednesday and is widely expected to also hold rates steady.

On Wall Street, the S&P 500 and the Nasdaq turned slightly

lower after touching fresh record highs earlier in the day. At

10:53 a.m. local time, the Dow Jones Industrial

Average was down 141.93 points, or 0.32%, to 44,695.08,

the S&P 500 slid 2.27 points, or 0.03%, to 6,387.65 and

the Nasdaq Composite fell 0.97 points, or 0.01%, to

21,177.39.

MSCI's gauge of stocks around the world

fell 1.97 points, or 0.21%, to 937.40.

European shares recovered after Monday's sell-off, with the

pan-European STOXX 600 index rising 0.3% in line with

the gain for Europe's broad FTSEurofirst 300 index.

TARIFF ECHOES

The U.S.-EU trade deal, announced on Sunday, included 15%

tariffs on EU imports to the U.S. and bolstered expectations

that more such agreements will follow ahead of Trump's August 1

deadline for trade deals.

Trump also flagged a "world tariff" rate of 15%-20% on all

trading partners that were not negotiating a deal - among the

highest rates since the Great Depression of the 1930s.

"While the worst-case scenario was averted, the implied EU

tariff increase from 1% in January is a significant tax increase

on EU exports," economists from JPMorgan wrote in a note.

"This is a very big shock that unwinds a century of U.S.

leadership in global free trade. While we no longer see a U.S.

recession as our baseline from this shock, the risk is still

elevated at 40%."

In currencies, the dollar index, which measures the

greenback against a basket of currencies including the yen and

the euro, rose 0.47% to 99.08.

The euro was down 0.54% at $1.1526 while sterling

weakened 0.28% to $1.3318.

Against the Japanese yen, the dollar strengthened

0.03% to 148.57 while the Canadian dollar weakened 0.27%

versus the greenback to C$1.38 per dollar.

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

fell 6.2 basis points to 4.358% from 4.42% late on

Monday, while the 30-year bond yield fell 7.2 basis

points to 4.8928%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

fell 2.4 basis points to 3.898% from 3.922%.

A further risk to world growth came from a sudden spike in

oil prices after Trump threatened a new deadline of 10 or 12

days for Russia to make progress toward ending the war in

Ukraine or face tougher sanctions on oil exports.

U.S. crude rose 1.15% to $67.48 a barrel and Brent

rose to $70.83 per barrel, up 1.13% on the day.

In precious metals, gold prices held nearly steady on

Tuesday as markets turned their focus to upcoming U.S.-China

talks and the Federal Reserve's policy decision.

Spot gold rose 0.41% to $3,327.56 an ounce.