San Francisco Frontiers - Dollar, US bonds under pressure amid global tensions and Trump tax bill

At the same time, fresh tensions focused on a report that Israel was planning a strike on Iranian nuclear sites drove up crude prices, while lingering US-China trade tensions hit stock markets.

Wall Street opened lower, while European share markets were mixed. The US dip extended losses from Tuesday, which ended a six-day rally.

Much of the US attention on Wednesday was focused on a push by Republicans to pass US President Donald Trump's "big, beautiful bill" to cut taxes and slash health coverage for millions of Americans.

It has "helped to push tariff and trade war concerns off the front pages", David Morrison, senior market analyst at Trade Nation, said.

While stock market losses were restrained so far, analysts worried that the US bond market, already weakened by a credit-rating downgrade by Moody's, could deepen its months-long slump.

"A bond market crisis is exactly the sort of event that could send stocks tumbling and volatility surging," said Kathleen Brooks, research director at XTB.

"It's also harder to recover from compared to the man-made tariff crisis," she added.

"With concerns about US debt situation also on the rise, this is increasing bearish calls on the dollar forecast," noted Fawad Razaqzad, market analyst at FOREX.com.

US and Japanese finance ministers were likely to touch on their currency policies at a G7 meeting going on in Canada, he said.

In Europe, London's FTSE and Frankfurt's DAX were barely changed in mid-afternoon trade, but Paris's CAC slipped.

Investors in Britain were looking at worse-than-expected annual inflation, which surged in April to 3.5 percent after a sharp rise in energy and water bills.

"The question is, whether higher inflation is a temporary blip or something that is more permanent," said XTB's Brooks. She suggested the Bank of England might ease the pace at which it had been cutting interest rates.

The CNN report suggesting Israel was looking at striking Iranian nuclear sites did little to dissuade Asian stocks, which all closed up -- except for Japan, where long-dated bonds lost ground.

If Japan ended up being forced to sell some of the $1.1 trillion in US Treasuries it holds to defend its currency, US yields could spike even higher, Razaqzad said.

"The world's two largest debt markets are dancing on a knife's edge," he said.

The uncertainty and the global tensions pushed the price of safe-haven gold higher.

While worries over the impact of Trump's tariffs were still reflected in the markets, Mexico said on Wednesday it had obtained a cut in the duties levelled at its auto imports into the United States.

Economy Minister Marcelo Ebrard said Washington had agreed to levy 15 percent instead of 25 percent.

- Key figures at around 1330 GMT -

New York - S&P 500: DOWN 0.6 percent at 5,907.08 points

New York - Dow: DOWN 0.8 percent at 42,329.22

New York - Nasdaq Composite: DOWN 0.6 percent at 19,032.42

London - FTSE 100: UP 0.1 percent at 8,789.80

Paris - CAC 40: DOWN 0.4 percent at 7,898.82

Frankfurt - DAX: UNCHANGED at 24,041.53

Tokyo - Nikkei 225: DOWN 0.6 percent at 37,298.98 (close)

Hong Kong - Hang Seng Index: UP 0.6 percent at 23,827.78 (close)

Shanghai - Composite: UP 0.2 percent at 3,387.57 (close)

New York - Dow: DOWN 0.3 percent at 42,677.24 (close)

Euro/dollar: UP at $1.1337 from $1.1284 on Tuesday

Pound/dollar: UP at $1.3432 from $1.3391

Dollar/yen: DOWN at 143.71 yen from 144.47 yen

Euro/pound: UP at 84.39 pence from 84.26 pence

Brent North Sea Crude: UP 0.7 percent at $65.87 per barrel

West Texas Intermediate: UP 0.9 percent at $62.58 per barrel

Gold: UP 0.19 percent at $3,296.47

H.King--SFF