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U.S., China to discuss trade in Switzerland at weekend

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Dollar down a fourth day, European stocks fall

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U.S. stock indexes are mixed with Nasdaq falling

(Updates prices to late U.S. afternoon, adds oil settlement)

By Sinéad Carew and Yoruk Bahceli

NEW YORK/LONDON, May 7 (Reuters) - World stocks lost

ground while U.S. Treasury yields had mixed reactions and the

dollar gained some ground in choppy trading on Wednesday after

the Federal Reserve left interest rates unchanged and warned of

higher inflation and labor market risks.

The U.S. central bank held rates steady, in line with

expectations. It said the economy continued to expand at a solid

pace but also cited rising risks of higher inflation and

unemployment as policymakers grapple with the impact of U.S.

President Donald Trump's tariff policies.

The risks of higher unemployment and higher inflation

left the Fed with almost no good short-term options, said Julia

Hermann, global market strategist, New York Life Investments.

"Their ability to preemptively cut rates to shore up

economic growth is constrained by upside inflation risks, and

then, conversely, their ability to preemptively hike rates to

reduce inflation risk is constrained by downside risk to growth.

So it's a stagflation conundrum," she said.

"We expect to see meaningful easing from the Fed only in

the scenario that economic growth figures really disappoint."

U.S. Treasury Secretary Scott Bessent and chief trade

negotiator Jamieson Greer are scheduled to meet China's top

economic official for talks at the weekend. It could be the

first step to agreement after Trump ignited a trade war with the

world's No. 2 economy last month.

Bessent said his sense is the meeting in Switzerland "will

be about de-escalation," while China sounded more guarded and

cited a proverb about actions speaking louder than words.

On Wall Street, at 02:50 p.m. the Dow Jones Industrial

Average rose 154.17 points, or 0.38%, to 40,983.17, the

S&P 500 fell 8.93 points, or 0.16%, to 5,597.98 and the

Nasdaq Composite fell 109.97 points, or 0.62%, to

17,579.69.

MSCI's gauge of stocks across the globe

fell 1.47 points, or 0.17%, to 840.44. Earlier the pan-European

STOXX 600 index closed down 0.54%.

In currencies, trading was choppy after the Fed

statement and as the central bank chair Jerome Powell took

questions from reporters.

The dollar index, which measures the greenback

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

rose 0.13% to 99.64.

The euro was down 0.33% at $1.1331. Against the

Japanese yen, the dollar strengthened 0.77% to 143.5.

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

notes fell 3.3 basis points to 4.285%, from 4.318%

late on Tuesday. The 30-year bond yield fell 3.2

basis points to 4.7809%.

The 2-year note yield, which typically moves

in step with Fed interest rate policy expectations, rose 0.6

basis points to 3.795%, from 3.789% late on Tuesday.

Oil prices settled lower by roughly $1 per barrel as

investors priced in a build in gasoline inventories in the U.S.

and looked ahead to the U.S.-China trade talks.

U.S. crude futures settled down 1.73%, or $1.02, at

$58.07 a barrel while Brent settled at $61.12 per

barrel, down 1.66%, or $1.03, on the day.

In precious metals, spot gold fell 1.36% to

$3,382.59 an ounce. U.S. gold futures fell 0.73% to

$3,386.60 an ounce.