GLOBAL MARKETS-US stocks inch higher ahead of Fed; Bitcoin surges

Updates to mid-afternoon

By Stephen Culp

NEW YORK, Dec 16 (Reuters) - The S&P 500 and the Nasdaq inched higher in contrast to world shares on Monday as U.S. Treasury yields paused and investors readied for a busy central bank week.

Bitcoin touched a new high after U.S. President-elect Donald Trump suggested he plans to set up a bitcoin strategic reserve.

"We’re continuing to see an uneven melt up of stocks, the rotation into value seems to have fizzled out, at least for now," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.

"There’s a risk-on type of mentality at that point that translates into stocks in a broader sense, and It continues to feed the view that under a Trump administration, the investment environment is going to be favorable to tech and new world-type investments," Pursche added.

The Federal Open Markets Committee $(FOMC)$ is due to convene on Tuesday for its last monetary policy meeting of 2024, which is expected to conclude with a 25 basis point cut in the key Fed funds target rate.

Investors will scrutinize the Fed's Summary of Economic Projections $(SEC.UK)$ and its "dot plot," which maps out the central bank's future rate cut path, which has become less certain in light of recent data showing sticky inflation amid a relatively robust economy.

"I’ll be listening for any forward-looking statements that address whether the Fed believes after this next cut that they are in a restrictive mode and when they intend to get to neutral, what conditions would be required in order to get to neutral," Pursche said.

A report from S&P Global showed that U.S. business activity has accelerated its expansion this month, despite ongoing weakness in the manufacturing sector.

Among central bank actions elsewhere, the Sweden's Riksbank is also expected cut interest rates, while policymakers in Japan, Britain and Norway are seen holding steady.

Soft retail sales data from China underscored the need for more aggressive stimulus from Beijing.

The Dow Jones Industrial Average .DJI fell 32.37 points, or 0.07%, to 43,795.83, the S&P 500 .SPX rose 30.04 points, or 0.50%, to 6,081.07 and the Nasdaq Composite .IXIC rose 256.77 points, or 1.29%, to 20,183.70.

European shares closed lower, weighed by heavyweight luxury goods and energy shares in the wake of China's downbeat retail sales report.

French stocks weighed on European markets after Moody's unexpectedly downgraded the country's rating on Friday.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 2.38 points, or 0.27%, to 868.52.

The STOXX 600 .STOXX index fell 0.12%, while Europe's broad FTSEurofirst 300 index .FTEU3 fell 1.38 points, or 0.07

Emerging market stocks .MSCIEF fell 3.80 points, or 0.34%, to 1,103.21. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed lower by 0.38%, to 583.17, while Japan's Nikkei .N225 fell 12.95 points, or 0.03%, to 39,457.49.

Yields on 10-year U.S. Treasuries steadied near three-week highs as investors awaited the Fed's rate decision on Thursday.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 0.2 basis points to 4.401%, from 4.399% late on Friday.

The 30-year bond US30YT=RR yield fell 0.1 basis points to 4.6131% from 4.614% late on Friday.

The 2-year note US2YT=RR yield, which typically moves in step with expectations for Fed rate decisions, rose 0.6 basis points to 4.247%, from 4.241% late on Friday.

The greenback was hovering near three-week highs as investors anticipated that the Fed could signal a more measured pace of easing in the coming year.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.01% to 106.88, with the euro EUR= up 0.05% at $1.0507.

Against the Japanese yen JPY=, the dollar strengthened 0.31% to 154.11.

Bitcoin, which has surged more than 50% since the U.S. presidential election, touched a new high, topping $106,000 after Trump indicated the possible establishment of a bitcoin reserve fund.

Bitcoin BTC= gained 3.54% to $106,479, while Ethereum ETH= rose 5.38% to $4,063.40.

Crude oil prices settled lower as soft data from China fed fears of softening demand from the world's largest oil importer.

U.S. crude CLc1 fell 0.81% to settle at $70.71 per barrel, while and Brent LCOc1 fell to $73.81 per barrel, down 0.78% on the day.

Gold prices inched higher as the dollar eased ahead of the central bank decision.

Spot gold XAU= rose 0.22% to $2,654.25 an ounce. U.S. gold futures GCc1 fell 0.15% to $2,652.00 an ounce.

(Reporting by Stephen Culp; Additional reporting by Wayne Cole in Sydney and Alun John in London; Editing by Alexander Smith and David Gregorio)

((stephen.culp@thomsonreuters.com; 646-223-6076;))

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