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US stock prices fell on Tuesday on weaker-than-expected economic data, while expectations of a possible Federal Reserve interest rate increase lifted the dollar to near a two-month high against a basket of currencies.
The drop on Wall Street stoked safe-haven bids for gold and less riskier US and German government debt. Oil futures faded into the red after rising earlier on higher than expected US gasoline demand for summer driving.
The S&P 500 index posted a third straight month of gains in May, but it may struggle to post further gains due to the risk of a Fed rate increase and worries about Britain's June 23 referendum on European Union membership.
“Equities will be in sideways trading going into the middle of the year with a possible rate hike and the vote in the UK," said Bill Northey, chief investment officer for US Bank's private client group in Helena, Montana.
Fed rate hike
US interest rate futures implied traders see a 28 per cent chance the Fed would raise rates next month and a 61 per cent chance it would do so at its July policy meeting, according to CME Group's FedWatch programme.
Worries about Britain's economy grew after two polls showed those campaigning for an exit from the EU had taken the lead. Sterling fell to one-week lows against the dollar and euro.
Dollar index
The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.3 per cent to 95.842, below a two-month high of 95.968 set on Monday. It rose 2.8 per cent for the month, its best performance in six months.
“Brexit” has complicated traders' view on the chances of a Fed rate increase because a British vote to leave the EU could result in market turmoil and pose further drag on a sluggish global economy.
Oil prices dip
US personal income and spending data on Tuesday suggested the economy is rebounding from a weak first quarter, led by a surprisingly strong 1 per cent rise in personal consumption in April. But dismal readings on consumer confidence and Midwest manufacturing raised worries the recovery may be short-lived.
The Dow Jones industrial average fell 86.09 points, or 0.48 per cent, to 17,787.13, the S&P 500 declined 2.11 points, or 0.1 per cent, to 2,096.95 and the Nasdaq Composite rose 14.55 points, or 0.29 per cent, to 4,948.06.
US and British markets were closed on Monday for local holidays.
The FTSEurofirst 300 index index ended down 0.8 per cent, but still booked its biggest monthly gain since November.
Earlier on Tuesday, Tokyo's Nikkei ended up 1 per cent for a monthly gain of 3.4 per cent.
The MSCI world equity index, which tracks shares in 45 nations, fell 0.1 per cent to 402.57.
US Treasury yield
As stocks slipped into negative territory, US Treasuries pared initial losses.
The yield on benchmark US 10-year Treasury notes edged up 1 basis point at 1.844 percent after rising as much as 5.5 basis points from Friday.
In commodities trading, US crude settled down 23 cents, or 0.47 per cent, at $49.10 a barrel, while Brent crude settled down 7 cents, or 0.24 per cent, at $49.69.
Spot gold prices rose $11.71, or 0.97 per cent, to $1,216.91 an ounce.
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