By Sinéad Carew and Chris Prentice

NEW YORK (Reuters) -MSCI’s global equities gauge lost ground on Tuesday as investors were jittery ahead of major corporate earnings reports and central bank meetings, while concern about the global economy pushed oil prices lower.

U.S. Treasury yields drifted lower in choppy trading as investors geared up for the outcome of the U.S. Federal Reserve meeting, which ends on Wednesday. The Fed is expected to hold interest rates steady for now but flag a rate cut in September.

Investors are also awaiting earnings reports from market heavyweights Microsoft and chipmaker AMD due after the bell and reports scheduled for later in the week from Apple and Amazon.com.

“Markets are on watch for earnings and what the Fed will say on Wednesday,” said John Praveen, managing director at Paleo Leon.

Praveen said some investors also worried about escalation in the Middle East after an Israeli air strike targeted a senior Hezbollah commander in Beirut’s southern suburbs late on Tuesday in what Israeli military said was retaliation for a cross-border attack that killed 12 children and teenagers.

On Wall Street, the Dow Jones Industrial Average rose 203.73 points, or 0.50%, to 40,743.66, the S&P 500 lost 27.12 points, or 0.50%, to 5,436.42 and the Nasdaq Composite lost 222.78 points, or 1.28%, to 17,147.42.

MSCI’s gauge of stocks across the globe fell 2.40 points, or 0.30%, to 801.95. Earlier, Europe’s STOXX 600 index closed up 0.45%.

In currencies, the Japanese yen gained on news reports that the Bank of Japan is considering raising rates to 0.25% when it concludes its two-day meeting on Wednesday.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.03% to 104.55. The euro fell 0.09% to $1.0809. Against the Japanese yen, the dollar weakened 0.56% to 153.14. Sterling weakened 0.22% to $1.2831.

Traders have been pricing in a roughly even chance for a Bank of England rate cut at its policy meeting on Thursday.

In U.S. Treasuries, the yield on benchmark U.S. 10-year notes fell 3.5 basis points to 4.143%, from 4.178% late on Monday. The 30-year bond yield fell 3.2 basis points to 4.4013% from 4.433% late on Monday.

And the 2-year note yield, which typically moves in step with interest rate expectations, fell 2.6 basis points to 4.3606%, from 4.387% late on Monday.

“The whisper expectation is for the Fed to acknowledge softness in inflation and the labor market and maybe acknowledge the potential for policy adjustment in September,” said Thomas Urano, co-chief investment officer and managing director at Sage Advisory in Austin, Texas.

“Absent that, the market would be short-term disappointed. Ultimately, we think the data will continue to show a much normalized labor market, if not weak, along with an inflation that’s running in the Fed’s target zone,” Urano said.

In energy markets, oil prices fell more than 1% to settle at a seven-week low as investors worried that demand from China could be weakening while OPEC+ seems likely to stick to plans to increase supplies.

U.S. crude settled down 1.4% at $74.73 a barrel and Brent ended its session at $78.63 per barrel, down 1.4% on the day.

In precious metals, gold prices gained on investor optimism the Fed will drop clues on Wednesday about lowering interest rates in September.

Spot gold added 1.04% to $2,408.32 an ounce. U.S. gold futures gained 1.15% to $2,405.20 an ounce.

(Reporting by Sinéad Carew, Gertrude Chavez-Dreyfuss and Chris Prentice, additional reporting by Tom Westbrook and Amanda Cooper, Editing by Sherry Jacob-Phillips, Sharon Singleton, Ros Russell, Will Dunham and Marguerita Choy)

---