Updates to midday in US markets

By Caroline Valetkevitch

NEW YORK, Dec 8 (Reuters) - U.S. Treasury yields rose and the dollar gained against the Japanese yen on Monday as investors assessed the potential impact of a strong earthquake in Japan, while major stock indexes were slightly lower.

A powerful magnitude 7.6 earthquake shook Japan's northeast region, prompting tsunami warnings and orders for residents to evacuate. The iShares MSCI Japan exchange-traded fund EWJ.P was down 0.7%. The dollar was last up 0.4% against the yen JPY=.

Key this week will be a Federal Reserve announcement on Wednesday. An interest rate cut is widely expected, but some strategists think the Fed's policy committee could be sharply divided.

Some investors speculated that the meeting could be one of the most fractious in recent memory. The Federal Open Market Committee has not had three or more dissents at a meeting since 2019, and it has happened just nine times since 1990.

Investors braced for signals of a milder easing cycle than expected. Expectations that the Fed will cut its policy rate by 25 basis points stand at 87.4%, according to CME Group's FedWatch Tool. Markets were pricing in less than a 30% chance of a cut until comments from Fed officials in recent weeks spurred a reversal in expectations.

"The market might be anticipating the Fed may indicate that after this rate cut there might be a pause in the first quarter of 2026, although I don't subscribe to that," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

JAPAN RATE DECISION DELAY?

The dollar rose against the yen after news of the earthquake in Japan. Depending on the extent of the earthquake's damage, the Bank of Japan could delay an expected rate hike next week, analysts said.

The next BOJ monetary policy meeting is scheduled for December 18-19, 2025, with the policy decision and statement expected on the second day.

The yield on the benchmark U.S. 10-year Treasury note US10YT-TWEB rose 4.9 basis points to 4.188% after reaching 4.19%, its highest level since September 26, and was on track for a third straight session of gains.

The Dow Jones Industrial Average .DJI fell 159.43 points, or 0.33%, to 47,796.26, the S&P 500 .SPX fell 21.37 points, or 0.30%, to 6,849.53 and the Nasdaq Composite .IXIC fell 40.44 points, or 0.17%, to 23,537.69.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 2.64 points, or 0.26%, to 1,008.09.The pan-European STOXX 600 .STOXX index fell 0.11%.

Earlier, Japan's Nikkei .N225 rose 90.07 points, or 0.18%, to 50,581.94.

Beijing's diplomatic spat with Tokyo worsened as a Chinese carrier strike group launched intense air operations near Japan over the weekend.

Central banks in Canada, Switzerland and Australia also meet this week and all are poised to hold steady. The Swiss National Bank might like to ease again to offset the strength of its franc, but it is already at 0% and reluctant to go negative.

A run of hot economic data has led markets to abandon any hope of another easing from the Reserve Bank of Australia and even price in a rate hike for late 2026.

In energy, U.S. crude CLc1 fell 1.53% to $59.16 a barrel and Brent LCOc1 fell to $62.81 per barrel, down 1.47% on the day.

(Reporting by Caroline Valetkevitch in New York, additional reporting by Iain Withers in London and Wayne Cole in Sydney, and Alun John in London.Editing by Joe Bavier, Aidan Lewis)

((caroline.valetkevitch@thomsonreuters.com))