(Updates prices)

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Fed Chair Powell gives no new direction on rate cuts

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European defence stocks jump after Trump's comments on

Ukraine

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US economic data shows slowing business activity in

September

By Amanda Cooper

LONDON, Sept 24 (Reuters) - Stocks declined on

Wednesday, echoing losses on Wall Street overnight, while the

dollar rose after Federal Reserve Chair Jerome Powell stopped

short of confirming investors' expectations of a looming slide

in U.S. interest rates.

In Europe, defence stocks - one of the best performing

sectors this year - jumped after U.S. President Donald

Trump said he believed Ukraine could retake all its land

occupied by Russia, marking a sudden shift in rhetoric in Kyiv's

favour.

"After seeing the Economic trouble (the war) is causing

Russia, I think Ukraine, with the support of the European Union,

is in a position to fight and WIN all of Ukraine back in its

original form," he said in a social media post on Tuesday,

although there was no evidence of any change in U.S. policy.

Defence stocks, including Rheinmetall, Hensoldt

and SAAB, rose between 2% and 5%, although

losses in financials kept the STOXX 600 down around

0.3% on the day.

US MARKET SET TO RISE AT OPEN

U.S. stock index futures held in positive

territory, up 0.1-0.3%, suggesting a modest rise at the open

later.

In a speech to the U.N. General Assembly, in which he

rejected moves by allies to recognise a Palestinian state, Trump

chastised Western nations for their approach to climate change

and immigration, telling leaders "your countries are going to

hell".

While geopolitics has been a driver for global markets this

year, the focus for investors on Wednesday was the outlook for

the U.S. economy and the likely path of U.S. interest rates.

The dollar rose broadly, leaving the euro, pound

and yen in negative territory, pushing up the U.S.

currency against a basket of six others by 0.5% on the day.

Powell, in remarks on Tuesday, largely stuck to the language

used last week when the central bank cut its benchmark rate by a

quarter of a percentage point. He underlined the need for

policymakers to balance the competing risks of high inflation

and a weaker jobs market in upcoming monetary policy decisions.

Given that traders have almost fully priced in a rate cut in

October, Powell offered little new direction for markets.

PACE OF CUTS HAS YET TO BE SEEN

"There was a clear pivot at the last meeting which set the

direction, but the pace (of cuts) is something we'll have to

see," Daiwa Capital economist Chris Scicluna said.

"All markets, if you're looking on the fixed-income side or

the equity side, are taking comfort from the expectation that

the Fed will be easing for the remainder of this year and again

next year and take them basically moving from a restrictive

stance to a neutral stance," he said.

Traders have raised their bets on further U.S. rate cuts,

with Fed funds futures implying a 91.9% chance of a cut at the

central bank's October meeting, up from a 89.8% probability on

Tuesday, according to the CME Group's FedWatch tool.

Longer-dated U.S. government bonds performed better than

other maturities, as yields on 30-year Treasury bonds

edged down 1 basis point on the day to 4.728%, while

the benchmark 10-year note was flat at 4.114%, as

was the rate-sensitive two-year yield, which held at

3.569%.

U.S. economic data released on Tuesday stoked growth concerns,

with purchasing managers' index data from S&P Global showing

business activity slowed for a second straight month in

September.

"The S&P PMIs were softer in the September preliminary

release, but both remain in expansion and are within the range

of the last few months," Citi analysts wrote in a research note.

But they pointed to more weakness in the details than implied in

the headline numbers.

"The composite output prices index fell to the lowest level

since April with anecdotes mentioning that firms are having

difficulty passing on higher costs to consumers due to weak

demand and more competition," the analysts said.

In commodities, the resurgent dollar pushed gold to $3,763

an ounce, down from a session peak at $3,779, just below

Tuesday's record high of $3,790.

On the oil market, Brent crude rose 1.1% to $68.34 a

barrel. Exports from Iraq's Kurdistan have stalled, which has

reduced the prospect of global oversupply, as demand wavers.

(Additional reporting by Gregor Stuart Hunter in Singapore;

Editing by Jamie Freed, Jacqueline Wong, Sam Holmes, Sharon

Singleton and Barbara Lewis)