By Sinéad Carew and Johann M Cherian

(Reuters) -The S&P 500 closed slightly higher on Tuesday, as investors scrutinized a mixed bag of earnings at big U.S. companies and digested comments from Federal Reserve policy makers for clues about its first planned interest-rate cut.

Minneapolis Fed President Neel Kashkari said the central bank is “not done yet” with inflation although he noted it had come down quickly with three-month and six-month inflation data “basically” at the Fed’s 2% goal.

Also, Cleveland Fed President Loretta Mester said that if the U.S. economy performs as she expects this could open the door to rate cuts. But Mester said she was not ready yet to suggest timing for easier policy due to inflation uncertainty.

On Sunday, Fed Chair Jerome Powell dashed any remaining hopes for a March rate cut. He had said the Fed can be “prudent” in deciding when to cut with a strong economy allowing time to build confidence that inflation is under control.

“The big macro news today is a couple of Fed governors confirming what Powell said over the weekend. It’s putting a little damper on markets today. It’s a little follow through from yesterday,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Stocks were down for much of the session before rising just ahead of the close.

The Dow Jones Industrial Average rose 141.24 points, or 0.37%, to 38,521.36. The S&P 500 climbed 11.42 points, or 0.23 %, to 4,954.23 and the Nasdaq Composite gained 11.32 points, or 0.07 %, to end at 15,609.00.

John Praveen, Managing Director & Co-CIO at Paleo Leon said the Fed should not wait too long to ease policy as troubles at regional Bank NY Community Bancorp spotlight weakness in the rate-sensitive commercial real estate sector.

Powell also referred to the sector on Sunday. On Tuesday, U.S. Treasury Secretary Janet Yellen said she was concerned about commercial real estate stresses on banks and property owners, yet she believes the situation is manageable with assistance from bank regulators.

Praveen saw the comments adding to investor jitters.

The KBW Regional Banking index finished down 1.4%, marking a 12.6% drop over six sessions. New York Community Bancorp shares ended down 22.2%. The lender has lost about 60% of its value since it reported a surprise quarterly loss last week citing write-offs for some real estate clients.

Airlines helped advance the Dow Jones Transport Average, which closed up 2.1%, with signs of strong air travel demand. Frontier Group Holdings’ rallied 20.8% after it surprised investors with a break-even financial report.

With over half of S&P 500 companies now having reported earnings, 81.2% surpassed expectations, according to LSEG data. Overall S&P 500 earnings are expected to have risen 8.1% in the fourth quarter from the year-ago quarter.

GE HealthCare Technologies finished up 11.6% after the medtech firm posted better-than-expected fourth-quarter earnings, driving the S&P 500 healthcare sector to an all-time high.

The materials index was the biggest gainer among the S&P 500’s 11 major sectors. It gained 1.7% with shares in chemicals firm DuPont de Nemours jumping 7.4% after it beat fourth-quarter profit estimates, announcing a $1 billion share-repurchase program and hiking its dividend.

Palantir Technologies shares soared 30.8% after forecasting upbeat annual profit.

However, Eli Lilly closed down 0.2% even after forecasting 2024 profit above estimates.

Chip stocks pressured the tech-heavy Nasdaq with the Philadelphia SE Semiconductor index ending down 1%. Rambus Inc led declines in the sector as its shares plunged 19.2% after its quarterly report.

Advancing issues outnumbered decliners by a 2.6-to-1 ratio on the NYSE. There were 190 new highs and 64 new lows on the NYSE.

On the Nasdaq 2,721 issues advanced and 1,476 declined as Advancing issues outnumbered decliners by a 1.8-to-1 ratio on the Nasdaq. The S&P 500 posted 27 new 52-week highs and 8 new lows while the Nasdaq recorded 110 new highs and 122 new lows.

On U.S. exchanges 11.21 billion shares changed hands compared with the 11.54 billion average for the last 20 sessions.

(Reporting by Sinéad Carew in New York, Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Pooja Desai and David Gregorio)

By Erwin Seba

HOUSTON (Reuters) -Brent and U.S. crude futures climbed over $1 a barrel on Tuesday after the U.S. Energy Department said crude oil production would not grow as fast as previously forecast.

Both then fell after remarks by a U.S. Federal Reserve official pointed to a later start for interest rate cuts.

Brent crude futures were up 41 cents, or 0.4%, to $78.39 a barrel by 11:44 a.m. CST while U.S. West Texas Intermediate crude futures rose 42 cents, or 0.58%, to $73.20. Both contracts had gained over 1% before sliding on Tuesday.

In its Short-Term Energy Outlook, the Energy Department said U.S. crude oil production will rise by 170,000 bpd this year; down from the previous forecasted rise of 290,000 bpd.

Remarks by Loretta Mester, president of the Federal Reserve Bank of Cleveland, quickly followed the Energy Department release.

Mester said interest rate cuts, widely expected in the late spring, were contingent on continuing declines in inflation before being implemented later in the year.

Traders began the day anticipating the Energy Department announcement, Mester’s remarks and the results of U.S. Secretary of State Anthony Blinken trip through the Middle East to end the Gaza War.

Blinken said on Tuesday morning that Hamas had replied to an Israeli proposal for a cease-fire that would be examined in the coming hours.

“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

“We were waiting for what the Federal Reserve would say,” said Phil Flynn, analyst at Price Futures Group. Mr. Blinken is overseas. A lot of people don’t think he’s going to be able to land a deal.”

Inventory data due to be released later on Tuesday and on Wednesday is expected to show continued strong inventories for gasoline and diesel, Flynn said. But going forward, those inventories are expected to tighten, he added.

U.S. crude stockpiles data is due later on Tuesday. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

Refiners are performing overhauls on plants across the country and an outage last week of the BP refinery in Whiting, Indiana, will limit production.

At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.

The U.S. strikes “do not point to an easing of tensions”, Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch said in a note.

Yet souring demand expectations limited oil’s gains.

CMC Markets analyst Leon Li also said it would be difficult to return to previous highs, given the run of strong economic indicators from the U.S. was likely to lose steam.

“Layoffs are still increasing. This means that in the long term the (oil) demand will decline,” Li said.

(Reporting by Paul Carsten in London and Stephanie Kelly and Trixie YapEditing by Jason Neely, David Goodman, David Ljunggren and David Evans)

By Herbert Lash and Stefano Rebaudo

NEW YORK (Reuters) -The dollar slid against major currencies on Tuesday, a day after it rose to its highest level in almost three months, as strong economic data and a hawkish stance on interest rates by Federal Reserve officials bolster the U.S. currency.

Robust U.S. economic data, including a blowout unemployment report on Friday, and recent remarks from Fed Chair Jerome Powell have quashed speculation about early and steep rate cuts by the U.S. central bank that the market had widely anticipated.

Cleveland Fed President Loretta Mester said on Tuesday that if the U.S. economy performs as she expects, it could open the door to rate cuts. But Mester said she was not ready to provide timing for easier policy amid ongoing inflation uncertainty.

Other central bankers agreed. The European Central Bank doesn’t need to rush cutting rates, policymaker Boris Vujcic told Reuters, arguing it will be better for ECB credibility to be sure that inflation is decisively under control.

The dominant storyline for FX traders is a return to the U.S. economic exceptionalism trade from the third quarter of 2023, said Matthew Weller, global head of research at FOREX.com.

“Now traders are wondering if instead of whether we’ll get a soft landing or recession, whether we could have no landing or re-acceleration this year,” he said. “To me it is a lot about the U.S. dollar, the Fed and the economic data that we’re seeing out of the U.S.”

Traders are currently pricing in a 19.5% chance of a cut in March, the CME Group’s FedWatch Tool shows, compared with a 68.1% chance at the start of the year.

They are also now pricing in around 117 basis points (bps) of cuts by the end of 2024, compared with around 150 bps anticipated in early January.

The dollar index, which measures the U.S. currency against six others, fell 0.22% to 104.22, having touched 104.60 on Monday, its highest since Nov. 14.

Key to understanding the dollar’s strength are Fed policy decisions versus those of other central banks, and how high rates stay, as higher yields can bolster a currency.

“The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years,” said George Saravelos, global head of forex research at Deutsche Bank.

“We continue to see the risks skewed towards less Fed easing and therefore in favor of the U.S. dollar,” he added.

The euro was flat at $1.0743.

German industrial orders unexpectedly jumped in December, while euro zone consumers have trimmed their expectations for inflation over the next 12 months.

“A potential repricing of the ECB (European Central Bank) policy path towards a first rate cut in June instead of April, which we regard as likely, would prop up the euro in the medium term,” said Roberto Mialich, forex strategist at UniCredit.

The Reserve Bank of Australia (RBA) earlier on Tuesday left rates unchanged, but cautioned about a possible further monetary tightening.

The Aussie rose 0.33% to $0.6515, inching away from the 2-1/2 month low of $0.6469 it touched on Monday.

The repricing of the RBA monetary path “helps to provide modest support for the Australian dollar in the near-term,” said Lee Hardman, senior currency analyst, at MUFG.

“Sentiment towards the Aussie has also been boosted indirectly overnight by the rebound in the Chinese equity market where speculation is building over further state policy action to provide stability,” he added.

Sterling edged slightly higher to $1.2588, but remained close to Monday’s seven-week low.

The pound’s fall on Monday came despite some upbeat economic data. Figures showed that UK unemployment was likely much lower late last year than previously thought, which could push out British rate cuts too.

The Japanese yen was stronger on the day at 148.00 per dollar, a bit off from a two-month low of 148.90.

Japan’s real wages fell for a 21st straight month, though at a slower pace, while household spending dropped for a 10th consecutive month, showing inflation outpaced wage recovery and continued to weigh on consumer spending.

(Reporting by Herbert Lash, additional reporting by Stefano Rebaudo and Ankur Banerjee in Singapore; Editing by Jamie Freed, Mark Potter and Ros Russell)

By Patrick Wingrove and Bhanvi Satija

(Reuters) – Eli Lilly on Tuesday forecast 2024 profit above Wall Street estimates on soaring demand for Zepbound, its recently approved weight-loss drug, and said it would have new supply from expanded manufacturing capacity as soon as this year.

Explosive demand for diabetes treatment Mounjaro, which had also been used off label for weight loss, and now Zepbound, has led to a buying spree of Lilly’s stock, propelling the drugmaker’s market value to over $600 billion.

Lilly announced on an investor call that its new Concord, North Carolina site would begin producing Zepbound and Mounjaro, both known chemically as tirzepatide, as early as the end of the year, with products available to ship in 2025.

Lilly said it expects to produce one and a half times as many sellable doses in the second half of 2024 as it did in the second half of last year.

The Indianapolis-based drugmaker said while it will expand manufacturing capacity, it expects demand for Mounjaro and Zepbound to outpace supply in 2024.

Zepbound sales reached $175.8 million in the first few weeks of its launch, following U.S. approval in November, Lilly said.

“I guess, (I was) most surprised by the sales of Zepbound. I wouldn’t have expected near that much,” said Troy Harmon, Chief Investment Officer at Henssler Financial.

The company said it expects 2024 revenue of $40.4 billion to $41.6 billion, and adjusted earnings of $12.20 to $12.70, putting the midpoint ahead of analysts’ estimates of $12.43 per share, according to LSEG data.

Shares were off about 1% at $696.82 after gaining about 11% in January, making Lilly the eighth largest company in the U.S. by market capitalization and most valuable healthcare company.

Truist analyst Robyn Karnauskus raised her price target for the company to $850 from $650.

Fourth-quarter Mounjaro sales rose to $2.21 billion from $279.2 million last year, easily outpacing expectations of $1.8 billion, according to BMO Capital Markets.

Finance chief Anaz Ashkenazi addressed this week’s news that contract manufacturer Catalent will be sold to the parent company of Novo Nordisk since that company also makes drugs for Eli Lilly.

Novo, which manufactures the weight-loss drug Wegovy and related diabetes treatment Ozempic, is Lilly’s main rival in the obesity market.

Ashkenazi said Catalent was an integral manufacturer of both commercial and pipeline products for the industry, especially in diabetes and obesity, “and we have products with these sites as well.”

She told investors the company will hold Catalent accountable to their contract, as it seeks more information about the deal, while CEO David Ricks told the Financial Times that Novo’s proposal to buy three of Catalent’s plants was “unusual” and raises potential antitrust concerns.

Both companies are testing their treatments for other health benefits such as heart disease, obstructive sleep apnea and chronic kidney disease, which could expand insurance coverage for the medicines.

Lilly on Tuesday said tirzepatide met the main goal of a mid-stage trial for a difficult to treat fatty liver disease formerly known as NASH and now called metabolic dysfunction-associated steatohepatitis, or MASH.

It said the drug helped up to 74% of patients achieve absence of the disease with no worsening of liver scarring at 52 weeks, compared to 13% of patients on placebo. A clinical trials database said patients in the study had stage 2 or 3 fibrosis.

Two analysts said they wanted to see more data on the benefit of tirzepatide on liver scarring. Lilly called the results “clinically meaningful” but did not say whether they

were statistically significant, they said.

The drugmaker on its call said the study was not designed to demonstrate statistically significant improvement in liver

scarring.

Still, the data sent shares of other companies developing drugs for the fatty liver disease tumbling. Madrigal Pharmaceuticals was down more than 18%, Akero Therapeutics was off 10% and 89Bio shares fell 16%.

Fourth-quarter profit of $2.49 per share on an adjusted basis, beat Wall Street expectations by 27 cents.

(Reporting by Bhanvi Satija and Leroy Leo in Bengaluru and Patrick Wingrove in New York; Editing by Arun Koyyur and Bill Berkrot)

By Andrea Shalal

WASHINGTON (Reuters) – Community organizers and Democratic elected officials on Tuesday urged Democrats to cast an “uncommitted” vote in Michigan’s Feb. 27 Democratic nominating contest to protest President Joe Biden not calling for a permanent ceasefire in Israel’s attacks on Gaza.

The “Listen to Michigan” campaign aims to encourage Democrats and independent voters across the battleground state, with sizable numbers of Arab and Muslim residents, to protest Biden’s handling of the crisis in the Middle East.

Layla Elabed, a Palestinian-American community organizer and the younger sister of U.S. Representative Rashida Tlaib, said the effort was focused on the primary election for now, unlike the nationwide Abandon Biden campaign that is urging voters to pick “anybody but Biden” in November’s general election. Biden is expected to face a rematch with Republican former President Donald Trump.

Dearborn Mayor Abdullah Hammoud will join the initiative, along with faith leaders and other community leaders, she said. Hammoud and other Arab-American leaders skipped a meeting last month with Biden’s campaign manager, demanding dialogue over the administration’s policy, not electoral politics.

Biden’s campaign did not respond to a request for comment on the new campaign. Michigan is among the seven states his campaign considers an election battleground because their voters’ preferences could swing to either party and determine the outcome of November’s race.

Biden visited the Midwestern state last week, winning a pledge of support from union autoworkers crucial to his reelection bid in Michigan, while protests over his backing of Israel’s actions in Gaza shadowed the trip. His candidacy for the Democratic nomination does not face serious competition.

The “Listen to Michigan” campaign’s website, with graphics in the colors of the Palestinian flag, offers detailed instructions on how to register to vote and cast an “uncommitted” ballot.

The “uncommitted” vote was used by then-candidate Barack Obama to win momentum in Michigan in 2008 after Michigan Democrats violated Democratic National Committee rules by moving the state’s primary in the nominating calendar, and Obama and other Democrats stayed off the ballot.

Elabed, who said she voted for Biden in 2020, told Reuters the campaign was aimed at spurring a dialogue with him, but stressed that even calling for a ceasefire and ending military aid to Israel would not guarantee the votes of the 80% of Michigan Democrats who now back a ceasefire.

“It means that we can start to have a conversation. It means that we can have some confidence that … we’re not on the back burner … and that our grievances and our rally cry to end the genocide are heard and taken seriously.”

The World Court late last month, ruling on a case brought by South Africa, ordered Israel to take action to prevent acts of genocide, but stopped short of calling for an immediate ceasefire. Israeli Prime Minister Benjamin Netanyahu said the charge of genocide leveled against Israel was “outrageous,” and said it would do whatever is necessary to defend itself.

Biden has faced criticism and protests in Dearborn, which is 54% Arab American, and from anti-war voices around the country for his support for Israel’s operations in Gaza.

The latest Middle East war erupted on Oct. 7 when Hamas attacked Israel, killing 1,200 people. Israel has since assaulted Hamas-governed Gaza, killing over 27,500 people, according to the local health ministry. Nearly all of Gaza’s 2.3 million population is displaced. The densely populated enclave also faces starvation.

Biden aides have said a broad ceasefire now would benefit Hamas, but the administration has called for more limited halts in fighting to allow for the release of hostages taken by Hamas and the distribution of aid to Gaza residents.

(Reporting by Andrea Shalal; Editing by Trevor Hunnicutt)

By Erwin Seba

HOUSTON (Reuters) -Oil prices rose on Tuesday in anticipation of tighter supply later in February while markets watched U.S. diplomatic efforts to end the Gaza War and quell tensions in a major crude-producing region.

Brent crude futures gained 87 cents, or 1.12%, to $78.86 a barrel by 10:49 a.m. CST while U.S. West Texas Intermediate crude futures rose 88 cents, or 1.21%, to $73.68. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.

Inventory data due to be released later on Tuesday and on Wednesday are expected to show continued strong inventories for gasoline and diesel, said Phil Flynn, analyst at Price Futures Group. But going forward, those inventories are expected to tighten, he said.

Refiners are performing overhauls on plants across the country and an outage last week of the BP refinery in Whiting, Indiana, will limit production.

Efforts by U.S. Secretary of State Antony Blinken to halt the Gaza war were also on traders’ minds.

“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Blinken on Tuesday landed in Cairo for a meeting with Egyptian President Abdel Fatah al-Sisi. Palestinians hope the visit will bring a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.

At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.

The U.S. strikes “do not point to an easing of tensions”, Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch said in a note.

Yet souring demand expectations limited oil’s gains.

Analysts said expectations of higher-for-longer interest rates in the U.S. and elsewhere, plus China’s shaky economy, could cap consumption.

CMC Markets analyst Leon Li also said it would be difficult to return to previous highs, given the run of strong economic indicators from the U.S. was likely to lose steam.

“Layoffs are still increasing. This means that in the long term the (oil) demand will decline,” Li said.

On the supply side, market participants are awaiting U.S. crude stockpiles data due later on Tuesday. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

(Reporting by Paul Carsten in London and Stephanie Kelly and Trixie YapEditing by Louise Heavens, Jason Neely, David Goodman and David Ljunggren)

By Herbert Lash and Stefano Rebaudo

NEW YORK (Reuters) -The dollar edged lower against major currencies on Tuesday, but remained close to its highest level in almost three months, as strong economic data and a hawkish stance on interest rates by Federal Reserve officials buoys the U.S. currency.

A string of robust U.S. economic data, including a blowout unemployment report on Friday, and recent remarks from Fed Chair Jerome Powell have quashed speculation about early and steep rate cuts that the market had anticipated.

Traders are currently pricing in only a 16.5% chance of a cut in March, the CME Group’s FedWatch Tool shows, compared with a 68.1% chance at the start of the year.

They are also now pricing in around 117 basis points (bps) of cuts by the end of 2024, compared with around 150 bps anticipated in early January.

The dollar index, which measures the U.S. currency against six others, fell 0.06% to 104.39, having touched 104.60 on Monday, its highest since Nov. 14.

The dominant storyline for FX traders is a return to the U.S. economic exceptionalism trade that was seen in last year’s third quarter, said Matthew Weller, global head of research at FOREX.com.

“Now traders are wondering if instead of whether we’ll get a soft landing or recession, whether we could have no landing or re-acceleration this year,” he said. “To me it is a lot about the U.S. dollar, the Fed and the economic data that we’re seeing out of the U.S.”

Key to that view is the outlook for interest rates and how high they stay, as higher yields help bolster a currency.

“The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years,” said George Saravelos, global head of forex research at Deutsche Bank.

“We continue to see the risks skewed towards less Fed easing and therefore in favor of the U.S. dollar,” he added.

The euro was flat at $1.0742%.

German industrial orders unexpectedly jumped in December, while euro zone consumers have trimmed their expectations for inflation over the next 12 months.

“A potential repricing of the ECB (European Central Bank) policy path towards a first rate cut in June instead of April, which we regard as likely, would prop up the euro in the medium term,” said Roberto Mialich, forex strategist at UniCredit.

The Reserve Bank of Australia (RBA) earlier on Tuesday left rates unchanged, but cautioned about a possible further monetary tightening.

The Aussie rose 0.31% to $0.6503, inching away from the 2-1/2 month low of $0.6469 it touched on Monday.

The repricing of the RBA monetary path “helps to provide modest support for the Australian dollar in the near-term,” said Lee Hardman, senior currency analyst, at MUFG.

“Sentiment towards the Aussie has also been boosted indirectly overnight by the rebound in the Chinese equity market where speculation is building over further state policy action to provide stability,” he added.

Sterling last fetched $1.2582, up around 0.37% on the day, but remained close to Monday’s seven-week low.

The pound’s fall on Monday came despite some upbeat economic data. Figures showed that UK unemployment was likely much lower late last year than previously thought, which could push out British rate cuts too.

The Japanese yen was stronger on the day at 148.250 per dollar, but not far off a two-month low of 148.90.

Japan’s real wages fell for a 21st straight month, though at a slower pace, while household spending dropped for a 10th consecutive month, showing inflation outpaced wage recovery and continued to weigh on consumer spending.

(Reporting by Herbert Lash, additional reporting by Stefano Rebaudo and Ankur Banerjee in Singapore; Editing by Jamie Freed and Mark Potter)

By Paul Carsten

LONDON (Reuters) -Oil prices maintained upward momentum on Tuesday as investors awaited the result of top U.S. diplomat Antony Blinken’s efforts in the Middle East to halt the Gaza war and quell tensions in a major oil-producing region.

Brent crude futures gained 42 cents to $78.41 a barrel by 1421 GMT while U.S. West Texas Intermediate crude futures rose 46 cents to $73.24. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.

“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Blinken met Saudi Arabia’s de-facto ruler on Monday and on Tuesday landed in Cairo for a meeting with Egyptian President Abdel Fatah al-Sisi. Palestinians hope the visit will bring a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.

The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, has yet to draw a response from militants who say they want more guarantees it will end the four-month-old war.

At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.

The group has described its recent attacks as acts of solidarity with Palestinians and on Tuesday said that it will escalate further if the Israeli attacks on Gaza do not stop.

The U.S. strikes “do not point to an easing of tensions”, Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch said in a note.

Yet souring demand expectations limited oil’s gains.

Analysts said expectations of higher-for-longer interest rates in the U.S. and elsewhere, plus China’s shaky economy, could cap consumption.

CMC Markets analyst Leon Li also said it would be “difficult to return to previous highs”, given that the run of strong economic indicators from the U.S. is likely to lose steam.

“Layoffs are still increasing. This means that in the long term the (oil) demand will decline,” Li said.

On the supply side, market participants are awaiting U.S. crude stockpiles data due later on Tuesday. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

(Reporting by Paul Carsten in London and Stephanie Kelly and Trixie YapEditing by Louise Heavens, Jason Neely and David Goodman)

By Paul Carsten

LONDON (Reuters) -Oil prices maintained upward momentum on Tuesday as investors awaited the result of top U.S. diplomat Antony Blinken’s efforts in the Middle East to halt the Gaza war and quell tensions in a major oil-producing region.

Brent crude futures gained 55 cents to $78.54 a barrel by 1224 GMT, while U.S. West Texas Intermediate crude futures rose 48 cents to $73.26. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.

“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Phillip Nova senior market analyst Priyanka Sachdeva.

As part of his trip to the region, Blinken met Saudi Arabia’s de-facto ruler on Monday, and on Tuesday landed in Cairo for his meeting with Egyptian President Abdel Fatah al-Sisi. Palestinians hope the visit will clinch a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.

The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, awaits a reply from militants who say they want more guarantees it will end the four-month-old war.

At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes. The group has described their recent attacks as acts of solidarity with Palestinians.

The U.S. strikes “do not point to an easing of tensions”, said Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch in a note.

Yet souring demand expectations limited oil’s gains.

Analysts said expectations of “higher for longer” interest rates in the U.S. and elsewhere plus China’s shaky economy could cap consumption.

CMC Markets analyst Leon Li also said it would be “difficult to return to previous highs” given that the run of strong economic indicators from the U.S. would likely lose steam.

“Layoffs are still increasing. This means that in the long term, the (oil) demand will decline,” Li said.

On the supply side, market participants are awaiting industry data due later on Tuesday on U.S. crude stockpiles. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

(Reporting by Paul Carsten in London and Stephanie Kelly and Trixie Yap; editing by Louise Heavens and Jason Neely)

By Stefano Rebaudo and Ankur Banerjee

(Reuters) -The U.S. dollar was up slightly on Tuesday, close to its highest level in almost three months, while the Australian dollar ran out of steam after rising earlier in the session.

A string of robust U.S. economic data and remarks from Federal Reserve Chair Jerome Powell have quashed speculation of early and steep interest rate cuts and supported the greenback.

Traders are currently pricing in only a 16% chance of a cut in March, the CME FedWatch tool showed, compared with a 69% chance at the start of the year.

They are also now pricing in around 115 basis points (bps) of cuts this year, compared with around 150 bps anticipated in early January.

The dollar index, which measures the U.S. currency against six others, rose 0.1% to 104.58, having touched 104.60 on Monday, its highest since Nov. 14.

“There seems little incentive for investors and corporates to offload any of their dollar holdings,” said Chris Turner global head of markets at ING.

“There is also the looming China Lunar New Year holiday next week, which may make the market reluctant to carry short dollar positions in an uncertain geopolitical environment,” he added.

Some analysts still see a positive outlook for the greenback.

“The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years,” said George Saravelos, global head of forex research at Deutsche Bank.

“We continue to see the risks skewed towards less Fed easing and therefore in favour of the U.S. dollar,” he added.

The euro was down 0.1% at $1.0732%.

German industrial orders unexpectedly jumped in December, while euro zone consumers have trimmed their expectations for inflation over the next 12 months.

“German data are supporting the single currency,” said Roberto Mialich, forex strategist at UniCredit.

“A potential repricing of the ECB (European Central Bank) policy path towards a first rate cut in June instead of April, which we regard as likely, would prop up the euro in the medium term,” he added.

The Reserve Bank of Australia (RBA) on Tuesday left rates unchanged, but cautioned about a possible further monetary tightening.

The Aussie rose 0.05% to $0.6492, inching away from the 2-1/2 month low of $0.6469 it touched on Monday. The New Zealand dollar was 0.13% higher at $0.6063.

The repricing of the RBA monetary path “helps to provide modest support for the Australian dollar in the near-term,” said Lee Hardman, senior currency analyst, at MUFG.

“Sentiment towards the Aussie has also been boosted indirectly overnight by the rebound in the Chinese equity market where speculation is building over further state policy action to provide stability,” he added.

The Aussie dollar is usually strongly correlated to Chinese stocks, as China is Australia’s largest trading partner.

Chinese stocks recorded their biggest one-day gain since 2022 and the yuan rose on a slew of signals that authorities are strengthening their resolve to support slumping markets.

Sterling last fetched $1.2565, up around 0.15% on the day, but remained close to Monday’s seven-week low.

The pound’s fall on Monday came despite some upbeat economic data. Figures showed that UK unemployment was likely much lower late last year than previously thought, which could push out British rate cuts too.

The Japanese yen was stronger on the day at 148.71 per dollar, but not far off a two-month low of 148.90.

Japan’s real wages fell for a 21st straight month, though at a slower pace, while household spending dropped for a 10th consecutive month, showing inflation outpaced wage recovery and continued to weigh on consumer spending.

(Reporting by Stefano Rebaudo and Ankur Banerjee in Singapore; Editing by Jamie Freed and Mark Potter)