The dollar eased and US stocks fell yesterday, snapping an eight-day advance by the benchmark S&P 500 index, as investors took a cautious stance before the Federal Reserve chief’s testimony to a US congressional panel today.

Analysts expect Fed Chairman Ben Bernanke to reiterate previous remarks that US monetary policy will remain accommodative. But investors will look for clues as to when the US central bank might start reducing its economic stimulus.

The dollar’s weakness against the euro was curbed by data showing an unexpected fall in German investor sentiment in July and subdued eurozone inflation, which added to expectations the European Central Bank will also keep rates low to aid the region’s recovery.

US stocks initially traded near break-even, but later fell in tandem with a sharper decline in European stock markets.

The euro rose 0.66 per cent to $1.3148, recovering from a level of $1.3057 struck after the German ZEW survey of investor sentiment. Against the yen, the dollar lost 0.69 per cent to 99.16 yen.

The dollar fell late last week after Bernanke said highly accommodative monetary policy would be needed for the foreseeable future. Bernanke’s remarks on the US economy and monetary policy will be released at 8.30am (1330 CET) today.

The Dow Jones industrial average was down 46.96 points, or 0.30 per cent, at 15,437.30. The Standard & Poor’s 500 Index was down 8.23 points, or 0.49 per cent, at 1,674.27. The Nasdaq Composite Index was down 11.57 points, or 0.32 per cent, at 3,595.92.

Shares of Coca-Cola Co fell after the company reported second-quarter sales were weaker than expected as global economic weakness and cool weather crimped consumption of soft drinks.

The Dow component’s shares fell 1.4 per cent to $40.45. The pan-European FTSEurofirst 300 index closed down 0.73 per cent at 1,191.15, while a measure of global equity markets, MSCI’s all-country world index, fell 0.08 per cent.

US Treasuries traded near break-even ahead of Bernanke’s testimony. He is expected to stress the Fed will hold rates low for a long time.

Benchmark 10-year Treasuries yields have fallen from two-year highs of 2.76 per cent on July 8 as officials have tried to soothe concerns over the pace at which the Fed will begin to phase out its unprecedented quantitative easing stimulus measures.

Tom Tucci, head of Treasuries trading at CIBC in New York, said the central banks would like to stop their bond-buying to help the economy.

“The way they are going to get out of it is by giving forward guidance that they are going to be extremely easy in the front end for a long period of time, which will anchor rates lower overall,” Tucci said.

US consumer prices accelerated in June, but underlying inflation pressures showed signs of stabilising, keeping on track expectations the Federal Reserve will start tapering its bond purchases later this year.

Other data yesterday showed US industrial production pushed higher in June, raising hopes that a recent slowdown in factory activity was either over or close to running its course.

US crude oil prices were marginally lower as traders awaited government and industry data that should show a draw in crude oil supplies for the third consecutive week.

Front-month US crude oil futures were consolidating just below the 15-month high of $107.45 made last Thursday, analysts said.

Brent crude was up 35 cents at $109.44 a barrel. US oil was down 38 cents to $105.94.

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