(Updates prices)

By Lawrence White

LONDON, May 21 (Reuters) - Stocks drooped and the dollar

held firm on Tuesday as investors awaited minutes of the Federal

Reserve's policy meeting, due Wednesday, for clues as to the

timing and extent of possible interest rate cuts this year.

Gold retreated from Monday's all-time peak and crude oil

fell on worries of U.S. interest rates staying high for longer

as Fed officials maintained a cautious view on a recent easing

of inflation.

Cryptocurrencies ether and bitcoin climbed to new six-week

peaks amid speculation that the U.S. Securities and Exchange

Commission (SEC) may approve a spot ether exchange-traded fund.

Markets currently factor in about 41 basis points of Fed

rate reductions this year, with a quarter-point cut fully priced

in for November.

Traders rushed to rebuild easing bets after data earlier

this month showed consumer price pressures receded in April,

following three months of upside surprises at the start of the

year.

Even so, Fed officials are reluctant to declare the fight

against inflation over, with Vice Chair Philip Jefferson saying

on Monday it was too early to tell if the slowdown is "long

lasting", and Vice Chair Michael Barr saying restrictive policy

needs more time.

Minutes of the last Fed meeting due on Wednesday could

provide valuable insight into the future policy path, although

the deliberations predate last week's softer CPI reading.

Europe's benchmark STOXX index of 600 stocks slid

0.4%, following an earlier decline of 0.9% in MSCI's broadest

index of Asia-Pacific shares outside Japan.

U.S. markets looked set to follow the muted tone with Nasdaq

futures inching 0.07% lower, while S&P 500 futures

were flat after Monday's 0.1% gain.

LITMUS TEST

Investors refrained from placing bets ahead of chip maker

Nvidia's ( NVDA ) earnings, also due on Wednesday and seen as a

litmus test for the continuing health of the generative AI boom.

"Market sentiment remains relatively robust, with implied

volatility low, supported by greater confidence in U.S. rate

cuts this year," Kyle Rodda, senior markets analyst at

Capital.com, wrote in a note.

At the same time, he said record highs for metals such as

gold and copper were being seen as a signal economic activity is

improving globally.

"That may be a factor keeping inflation sticky," Rodda

added.

Gold fell 0.3% to about $2,417 per ounce, after

pushing to the cusp of $2,450 for the first time overnight.

The greenback held its ground against major peers, with the

dollar index flat at 104.54 after rebounding from a

five-week trough of 104.07 reached on Thursday.

The 10-year Treasury yield was little changed at

4.4276%, after ticking up 1.7 basis points on Monday.

Brent crude futures declined 1.16% to $82.73 a

barrel and U.S. West Texas Intermediate crude (WTI) eased

1.34% to $78.73.

Meanwhile, traders snapped up cryptocurrencies following a

report that the SEC had abruptly asked exchanges that want to

trade ether Exchange Traded Funds (ETFs) to update regulatory

filings, boosting bets that approval could come this week.

Crypto experts said the overall chances of approval remained

low.

"The key thing is that the market was effectively pricing in

a near-zero percent chance of approval up until this point,"

said Joseph Edwards, head of research at Enigma Securities.

Bitcoin climbed as high as $71,957 and ether

jumped to $3,720.80, both hitting levels not seen since April 9.