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Benchmark S&P 500 slightly ahead in choppy trading

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European stocks touch record highs, defence stocks rally

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Euro zone borrowing costs rise on spending boost

expectations

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Gold gains on U.S. tariff uncertainty, inflation worries

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Investors wait on U.S-Russia talks

(Updates prices throughout with U.S. market open, adds analyst

quote)

By Chibuike Oguh and Naomi Rovnick

NEW YORK/LONDON, Feb 18 (Reuters) -

Global equity markets edged higher, with Wall Street stocks

slightly ahead in choppy trading and European shares hitting

record highs on Tuesday, as markets digested strong U.S.

earnings, trade tariffs and a big European defence spending

hike.

The pan-European STOXX 600 index hit an all-time

high of 557.96 early on Tuesday as a gauge of defence and

aerospace stocks rose 1% after rallying more than 4%

on Monday.

On Wall Street, benchmark S&P 500 was slightly higher while

the Dow and the Nasdaq were losing ground with consumer

discretionary, utilities, industrials, and financials advancing

while technology and energy shares were the biggest losers.

The Dow Jones Industrial Average fell 0.22% to

44,449.74, the S&P 500 rose 0.04% to 6,117.31 and the

Nasdaq Composite fell 0.04% to 20,018.02.

"I think people are still trying to digest everything going

on with not only tariffs and how that could impact things but

also general valuations . . . we feel like the market is pretty

expensive," said Sandy Villere, portfolio manager at Villere &

Co in New Orleans.

A Chinese stock rally cheering Monday's rare meeting

between President Xi Jinping and domestic business leaders also

boosted risk-taking appetite.

European leaders vowed to step up support for Ukraine if

bilateral talks this week between Russia and the U.S. lead to a

hasty peace deal that compromises Europe's security.

Investors also hope this weekend's German election will lead

to economic stimulus. Expectations for higher government

spending lifted Germany's benchmark 10-year bond yield

to 2.5%, near its highest level of the month.

"That means massive fiscal transformation in Europe," said

John Hardy, global head of macro strategy at Saxo Bank in

Denmark. He expected Europe's STOXX index to outperform Wall

Street this year, meanwhile, as investors also fretted about

U.S. trade tariffs, inflation and highly valued tech stocks.

Europe's stock indices are dominated by industrial groups,

energy producers and banks and attracted their biggest weekly

investment inflow last week since January 2023, Bank of America

said.

Key measures of U.S. inflation are also running at a half

percentage point or more above the Fed's goal, with some of its

officials arguing to delay rate cuts.

Minutes from the Fed's January meeting, where it held

borrowing costs at 4.25% to 4.5%, are due on Wednesday. That

follows hawkish comments from central bank chair Jerome Powell

in testimony to Congress last week and hot consumer prices data.

The yield on benchmark U.S. 10-year notes rose

4.3 basis points to 4.519%.

"You've got not only the tariff situation, which I think is

going to be more sabre-rattling and negotiating than anything

long-term; the other thing is inflation that could be a little

more stubborn than people think and I don't think the Fed can

cut interest rates as fast as originally expected," Villere

said.

The U.S. dollar advanced against major currencies, with

losses led by the euro, garnering safe-haven bids amid tariff

concerns and peace negotiations on the Russia-Ukraine conflict.

The dollar strengthened 0.13% to 151.69 against the

Japanese yen. Against the Swiss franc , the

dollar strengthened 0.11% to 0.902.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.16% to 106.89, with the euro down 0.18% at

$1.0463.

Australian dollar weakened 0.05% versus the greenback

to $0.635, having been spared blows from the central bank's

first rate cut since 2020 on Tuesday as policymakers delivered

it with caution about prospects of further easing.

Brent crude oil was steady at $75.58, up 0.49%, a

barrel as traders awaited the outcome of the Russia-U.S. talks

taking place in Riyadh and speculated about potential supply

increases if Washington agrees to abandon sanctions on Russian

oil.

Spot gold rose 1.05% to $2,928.13 an ounce. U.S. gold

futures rose 1.59% to $2,929.40 an ounce.