San Francisco Frontiers - Stock markets diverge, as oil prices cool

The week's main focus is expected to be US inflation figures Wednesday, while attention is also on the oil market on concerns about a broader war in the Middle East.

Crude futures dropped Tuesday but remained well up over the week owing also to an escalation of tensions in major oil producer Russia.

The White House warned that a "significant set of attacks" by Iran and its proxies against Israel was possible as soon as this week after top leaders of Hezbollah and Hamas were assassinated in late July.

While the mood on trading floors has calmed since last week's volatility, investors remained cagey before US consumer and wholesale price figures this week that could play a role in the Federal Reserve's monetary policy decision-making.

Observers warned that the inflation readings could cause big market moves in either direction, with a weaker-than-expected print adding to worries about the world's biggest economy, while a strong reading could dent rate-cut bets.

"One of the major risks is the timing and magnitude of the Fed's rate cuts," said ACY Securities' Luca Santos.

"If the Fed delays easing monetary policy, the US economy could risk entering a deeper slowdown, leading to a potential recession.

"Conversely, if the Fed cuts rates too aggressively, it might reignite inflationary pressures or create financial market instability. Balancing these risks will be crucial for maintaining economic stability," Santos added.

After a tepid Monday on Wall Street, Asian markets extended a strong start to the week.

Tokyo surged, with traders catching up with Monday's gains elsewhere after a long holiday weekend in Japan.

London gave up early gains won after data showed Britain's unemployment rate had unexpectedly dropped in the second quarter and wage growth slowed to the lowest level in nearly two years.

Paris and Frankfurt fell slightly approaching the half-way mark.

German investor confidence worsened more than expected in August, a survey showed Tuesday, as a hoped-for recovery in Europe's largest but struggling economy remains out of reach.

The ZEW institute's closely-watched economic expectations index fell to 19.2 points, a steep drop of 22.6 points from a month earlier.

- Key figures around 1100 GMT -

London - FTSE 100: DOWN 0.1 percent at 8,198.64 points

Paris - CAC 40: DOWN 0.2 percent at 7,234.30

Frankfurt - DAX: DOWN 0.1 percent at 17,700.82

EURO STOXX 50: DOWN 0.1 percent at 4,665.45

Tokyo - Nikkei 225: UP 3.5 percent at 36,232.51 (close)

Hong Kong - Hang Seng Index: UP 0.4 percent at 17,174.06 (close)

Shanghai - Composite: UP 0.3 percent at 2,867.95 (close)

New York - Dow: DOWN 0.4 percent at 39,357.01 (close)

Euro/dollar: DOWN at $1.0923 from $1.0931 on Monday

Pound/dollar: UP at $1.2785 from $1.2766

Dollar/yen: UP at 147.53 yen from 147.26 yen

Euro/pound: DOWN at 85.42 pence from 85.61 pence

West Texas Intermediate: DOWN 0.3 percent at $79.84 per barrel

Brent North Sea Crude: DOWN 0.3 percent at $82.04 per barrel

V.Mitchell--SFF