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EghtesadOnline: Stocks slipped on Wednesday while the dollar continued to claw back last week's losses as investors grappled with the prospect of a U.S. interest rate increase in the months ahead coming amid continued uncertainty about the strength of the global economy.

This uneasy balance helped push the U.S. yield curve, the difference between 10-year and two-year yields, to its flattest in a month. A flattening yield curve is often seen as a harbinger of low growth, inflation and rates over the long term.

According to Reuters, Asian and world stock indices succumbed to profit-taking after reaching one-year highs earlier this month, while U.S. futures pointed to a lower open on Wall Street. The S&P 500 and Nasdaq came within a whisker of all-time highs on Tuesday.

European shares were dragged down by British mining giant Glencore (GLEN.L), which fell 2.8 percent after reporting a fall in underlying profit and lowering its debt target.

"As speculators play the dollar, global markets lack a clear direction," said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

"Miners and energy stocks are again under selling pressure. Glencore's meager first half results are a fresh reminder of how vulnerable the mining sector still is," she said. 

In early European trade, the FTSEuroFirst index of leading 300 shares on the continent was down 0.3 percent at 1,347 points .FTEU3. Britain's FTSE 100 and Germany's DAX were also down 0.3 percent .FTSE .GDAXI.

Europe's Basic Resources index .SXXP fell 1.6 percent, hit by copper prices languishing near six-week lows.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent, having risen more than 14 percent since late June. Japan's Nikkei .N225 rose 0.6 percent, supported by a slightly weaker yen.

MSCI's main global stock index was down 0.2 percent .MIWD00000PUS

U.S. CURVE FLATTENS

In currency markets, the dollar consolidated ahead of the gathering of global central bankers later this week in Jackson Hole, Wyoming, where the focus will lie squarely on a speech by Federal Reserve Chair Janet Yellen on Friday.

Investors will be hoping for further clues on when the Fed will follow up last December's rate hike with another increase. Futures markets assign a roughly one-in-five chance it will be September, and 50-50 odds by the end of the year.

The dollar was last up slightly against the yen at 100.25 yen JPY=, holding above the psychologically important 100 level, and the euro was hovering just below $1.13 EUR=.

The dollar index of its value against a trade-weighted basket of currencies .DXY edged up to 94.604, after falling more than 1 percent last week.

"Seemingly in anticipation of a relatively hawkish message from Fed Chair Yellen at the forthcoming Jackson Hole Symposium, the dollar is making modest gains," RBC Capital Markets analysts wrote in a client note on Wednesday.

"But other markets are more circumspect about the prospect of Yellen signaling a tougher stance on monetary policy," they added.

One is the bond market. The 2-10 U.S. yield curve flattened to 78 basis points earlier on Wednesday, the flattest in a month US2US10=TWEB, suggesting investors are lukewarm on what higher borrowing costs will do for the U.S. and world economy.

Last month the curve traded as low as 73 basis points, the flattest since 2007.

Oil prices fell, reversing earlier gains, after the American Petroleum Institute (API) reported on Tuesday that U.S. crude inventories rose by a surprising 4.5 million barrels last week.

Brent crude LCOc1 fell 1.3 percent to $49.33 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 slipped 1.6 percent to $47.33.

Dollar U.S. interest rates global economy