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Dollar gains while Treasury yields rise

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Switzerland keeps interest rates at zero

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Brent futures settle slightly higher, WTI ends close to

flat

(Updates prices to late afternoon after oil settlement)

By Sinéad Carew and Marc Jones

NEW YORK/ LONDON, Sept 25 (Reuters) -

MSCI's global equities gauge lost ground while bond yields

rose as investors worried that Thursday's surprisingly strong

economic data would make the Federal Reserve more cautious about

cutting interest rates.

U.S. Treasury yields rose after the Commerce Department's Bureau

of Economic Analysis said the U.S. economy grew faster than

previously thought in the second quarter, pumped up by an ebb in

imports and a pickup in consumer spending. Second quarter gross

domestic product increased at an upwardly revised 3.8%

annualized rate versus initial reports of a 3.3% pace.

Also, new orders for key U.S.-manufactured capital goods

unexpectedly increased in August, but a decline in shipments of

these goods suggested a moderate pace of growth in business

spending on equipment this quarter.

And the Labor Department said on Thursday that the number of

Americans filing new applications for unemployment benefits fell

by 14,000 to a seasonally adjusted 218,000 for the week ended

September 20. Economists polled by Reuters had forecast 235,000

claims for the latest week.

"If you're looking for continued fuel for equities to move

higher and broaden out versus what we've seen the last couple of

years, you need a continuation of the momentum that's been built

over the summer in terms of the Fed easing and easing materially

through 2026," said Matt Stucky, chief portfolio manager for

equities at Northwestern Mutual Wealth Management Company.

Also on Thursday, Fed Bank of Chicago President Austan Goolsbee

said that while he supported last week's interest-rate cut

because the labor market is cooling, he was not eager to do a

lot more policy easing while inflation is above target and

moving the wrong way.

But Fed Governor Stephen Miran said on Fox Business' Mornings

with Maria program that the U.S. economy is more vulnerable to

shocks right now due to high interest rates based on unfounded

inflation concerns among Federal Reserve policymakers.

And San Francisco Federal Reserve Bank President Mary Daly said

on Wednesday she "fully supported" the decision by the Fed to

cut its policy rate last week and expects further reductions

ahead. But regarding the timing of those cuts she said it was

"hard to say."

On Wall Street, indexes hit one-week lows after the data and the

commentary. At 02:41 p.m. the Dow Jones Industrial

Average fell 146.95 points, or 0.32%, to 45,975.28, the

S&P 500 fell 32.12 points, or 0.48%, to 6,605.85 and the

Nasdaq Composite fell 114.50 points, or 0.51%, to

22,383.35.

MSCI's gauge of stocks across the globe

fell 6.30 points, or 0.64%, to 973.11 after hitting its lowest

level since September 11.

Earlier the pan-European STOXX 600 index closed

down 0.66% after touching its lowest level since Sept 5 with

med-tech stocks coming under pressure after news of the U.S.

opening new import-related probes, and investors focused on Fed

commentary.

In government bonds, U.S. Treasury yields rose on Thursday

following stronger-than-expected second-quarter economic data

that could strengthen the case for a rates pause from the Fed at

its October meeting.

"It seems like we're reacting more to the GDP upside

surprise," said Molly Brooks, U.S. rates strategist at TD

Securities, about the uptick in two- and 10-year Treasury

yields. "(But) I think markets are still biased towards seeing a

slowdown in data going forward."

The yield on benchmark U.S. 10-year notes rose 3

basis points to 4.178%, from 4.147% late on Wednesday while the

30-year bond yield fell 0.4 basis points to 4.7536%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

rose 6.7 basis points to 3.666%, from 3.598%.

In currencies, the dollar gained against peers including the

euro and yen on signs that the U.S. economy grew faster than

previous expectations in the second quarter, potentially

restraining Fed rate easing.

The dollar index, which measures the greenback against a

basket of currencies including the yen and the euro, rose 0.72%

to 98.54.

The euro was down 0.71% at $1.1654 and against the

Japanese yen, the dollar strengthened 0.64% to

149.85. Sterling weakened 0.83% to $1.3332.

Against the Swiss franc, the dollar strengthened

0.67% after the Swiss National Bank held interest rates at zero

on Thursday in its first pause since late 2023.

Oil prices gave up earlier losses to settle near Wednesday's

seven-week closing high while the economic data tempered

optimism about the rate cut outlook.

U.S. crude settled down 0.02%, or 1 cent at $64.98 a

barrel and Brent settled at $69.42 per barrel, up 0.16%,

or 11 cents on the day.

Safe-haven gold pulled itself back up from early session losses,

but was still below Wednesday's peak.

Spot gold rose 0.56% to $3,756.93 an ounce. U.S. gold

futures rose 0.06% to $3,734.20 an ounce.

In cryptocurrencies, bitcoin fell 3.47% to

$109,656.05 after hitting its lowest level since early

September.