NEW YORK/LONDON, Jan 23 (Reuters) - MSCI'S global equities index was down slightly as Wall Street stocks took a breather while investors waited for key economic releases and the yen fell after the Bank of Japan left monetary policy unchanged.
U.S. Treasury yields rose as investors sought a greater return for the risk of taking on rising government debt issuance with shorter-term Treasuries being auctioned this week. Also investors are waiting for the U.S. Treasury's announcement next week of funding needs for the coming quarter.
Oil prices on Tuesday handed back some of the previous day's gains, as traders weighed production outages in the U.S. and tensions in the Middle East and Europe against rising crude supply in Libya and Norway.
The MSCI world equity index, which tracks shares in 49 nations, gained 0.03% after hitting its highest level since late December on Monday. The Dow Industrial Average was down while the Nasdaq rose slightly.
"It's not surprising markets are taking a step back today and hitting the pause button," said Anthony Saglimbene, chief market strategist at Ameriprise Financial, citing recent market strength and caution ahead of economic data releases and earnings reports from megacap technology companies.
S&P 500 was barely higher on Tuesday after hitting record closing levels in the last two sessions. Investors are waiting for key economic due out later this week such as fourth-quarter GDP and the December data for Personal Consumption Expenditure (PCE), Federal Reserve's favored inflation.
The Dow Jones Industrial Average fell 105.84 points, or 0.28%, to 37,896.81. It was dragged down by a sell-off in 3M shares after it forecast dour annual earnings due to weak demand. Countering that was a rally in Verizon Communications after a strong annual profit forecast.
Currency trading was volatile after the Bank of Japan kept interest rates in negative territory, but signalled conviction that conditions for phasing out its ultra-loose monetary policy were falling into place.
In afternoon trading the dollar rose 0.17% against the yen to 148.33 after earlier falling to a low of 146.97 yen.
The dollar index, which tracks the greenback against a basket of six currencies, was up 0.27% at 103.61.
The European Central Bank (ECB) meets on Thursday and is expected to hold monetary policy steady. The Fed is also expected to keep rates steady when it meets next week but investors will be on the lookout for clues on the timing for rate cuts.
In Treasuries, the yield on benchmark 10-year Treasury notes rose to 4.1358% compared with its U.S. close of 4.094% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.3805% compared with a U.S. close of 4.376%.
U.S. crude settled down 0.5% to $74.37 a barrel. Brent crude finished down 0.64% at $79.55 per barrel.
Spot gold rose 0.44% to $2,029.94 an ounce as investors waited for U.S. economic data this week, hoping it will bring more clarity on the Fed policy.
Earlier, Hong Kong stocks staged a rebound to close up 2.6% after slumping the previous session, when foreign outflows gathered pace and short selling surged.
After China's cabinet pledged to take measures to stabilise market confidence, the Shanghai SE composite index showed a muted recovery, rising 0.5%, after touching a five-year low on Monday. One option is mobilising some 2 trillion yuan ($278.53 billion) to support the stock market, Bloomberg News reported.
"The one positive for the market today was the suggestion China would be moving towards supporting their stock market," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
(Additional reporting by Stella Qiu in Sydney and Ankur Banerjee in Singapore; Editing by Kim Coghill, Bernadette Baum, Chizu Nomiyama, Nick Macfie and Aurora Ellis)
