U.S. bond yields retreat from 2-year peaks; world stocks mixed

By Richard Leong

NEW YORK (Reuters) - U.S. bond yields receded from two-year highs on Tuesday on revived safe-haven bids as prices on world stock exchanges fell to the lowest level in over a month on concerns that less U.S. monetary stimulus will hamper global growth.

The dollar fell against major currencies, hitting a six-month low against the euro, while a weaker U.S. currency helped steady gold prices. Wall Street stocks were up slightly.

Speculation whether the U.S. Federal Reserve might shrink its bond purchases at its policy meeting next month also knocked oil prices lower, although unrest in Egypt and reduced Libyan supply stemmed a further decline.

"The ongoing meltdown in regional currencies is starting to negatively influence all risk assets and, for the moment, is helping create a bid for the Treasury market," said John Briggs, U.S. rate strategist at RBS Securities in Stamford, Connecticut.

The Federal Open Market Committee, the U.S. central bank's policy-setting group, will release the record of its July 30-31 meeting on Wednesday. Traders anticipate the minutes will contain clues whether the Fed is on track to reduce its $85 billion monthly purchases of U.S. bonds at its September 17-18 meeting.

Anxiety that U.S. policymakers would dial back the Fed's third round of quantitative easing, or QE3, has been accompanied by worries the Fed is looking to raise short-term interest rates, even though Fed officials have assured markets it would not happen for a long time.

The yield on 10-year Treasury notes fell to 2.8197 percent, down more than 8 basis points from late on Monday, when it climbed as high as 2.90 percent.

Treasury yields are benchmarks for domestic mortgage rates and other long-term borrowing costs. Some economists have cautioned the surge in yields since May would slow the housing recovery, auto sales and other rate-sensitive sectors in the world's largest economy.

German government bonds, Europe's equivalent benchmark, moved in lock step with U.S. yields, easing to 1.844 percent after topping 1.9 percent a day earlier.

The spike in Treasury yields has exerted downward pressure on stocks since last week.

"This has been a technical pullback (in stocks), and with the 10-year yield near 3 percent we are pretty close to reversing it," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

Wall Street stocks opened slightly higher on Tuesday after recording their longest losing streak in 2013 as major retailers reported positive profits and outlooks. <.N>

The Dow Jones industrial average was up 35.40 points, or 0.24 percent, at 15,046.14. The Standard & Poor's 500 Index was up 7.53 points, or 0.46 percent, at 1,653.59. The Nasdaq Composite Index was up 20.80 points, or 0.58 percent, at 3,609.88.

Europe's top shares were down 0.9 percent, near a two-week low, while emerging stocks <.MSCIEF> fell 1.3 percent to trade at a five-week low, though both indexes had recovered slightly during the morning session.

Tokyo's Nikkei index <.N225> fell 2.6 percent.

Broad equity losses weakened the MSCI world share index by 0.3 percent to its lowest since July 11, though it subsequently recovered some of the loss and was off 0.1 percent.

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Asset returns in 2013: http://link.reuters.com/dub25t

Currencies v dollar in 2013: http://link.reuters.com/tak27s

Rupee, bonds, FX yields: http://link.reuters.com/gaw89t

Reuters Insider on Global Markets: http://reut.rs/1cTFQ3H

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COMMODITIES BATTERED

With the focus on the Fed cutting stimulus, the dollar index, which measures the greenback against a basket of currencies , fell 0.5 percent to its lowest level in more than two months.

The euro strengthened 0.7 percent versus the dollar at $1.3430, just a touch below its six-month high of $1.3452, while the dollar fell 0.4 percent against the Japanese yen at 97.17 yen.

Emerging market volatility also spurred the yen.

"The yen tends to attract buying when tensions in the market increase," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

In commodities trade, copper futures in London edged up 0.1 percent to $7,315.50 a tonne, erasing earlier losses.

Spot gold prices rose 0.6 percent at $1,374.36 per ounce, hovering near a two-month high set on Monday.

Brent crude prices fell 29 cents or 0.26 percent at $109.61 a barrel, pressured by the Fed speculation but supported by the loss of Libya's oil exports as well as concerns that continuing unrest in Egypt could spread and interfere with supply. U.S. oil was off 77 cents, or 0.72 percent, at

$106.33.

(Additional reporting by Luciana Lopez, Rodrigo Campos and Wanfeng Zhou in New York and; Marc Jones in London; Editing by Dan Grebler)