GLOBAL MARKETS-US, European shares little changed ahead of Ukraine talks, Jackson Hole

By Samuel Indyk and Gertrude Chavez-Dreyfuss

LONDON/NEW YORK, Aug 18 (Reuters) - Wall Street and European shares were flat to marginally lower on Monday ahead of a potentially eventful week for U.S. interest rate policy, even as attention turned to Washington where Ukraine's Volodymyr Zelenskiy and European leaders will meet President Donald Trump.

The S&P 500 .SPX was down slightly in midday trading, but remained within striking distance of its all-time high hit on Friday.

The pan-European STOXX 600 index .STOXX was flat after hitting its highest since March last week, which left the MSCI All Country World Index .MIWD00000PUS 0.1% lower, but not far from its record high touched on Friday.

Earlier in the Asian session, indexes in Japan and Taiwan hit record peaks, while a gauge of Chinese stocks .SSEC reached its highest level in a decade.

Investors were bracing for Trump's meeting with Zelenskiy and European leaders later on Monday to discuss the next steps to end the war in Ukraine, after Trump's summit with Russian President Vladimir Putin in Alaska on Friday.

"Expectations for any breakthrough are low, but apart from energy and assets with direct exposure to the region, the marginal impact on sentiment from the conflict has faded," Geoff Yu, EMEA macro strategist wrote in a research note.

While the Alaska summit did not result in an agreement, Trump afterwards appeared more aligned with Moscow on seeking a full peace deal over Ukraine instead of a ceasefire first.

Another key focus for the week is the Federal Reserve's August 21-23 Jackson Hole symposium, where Chair Jerome Powell is due to speak on the economic outlook and the central bank's policy framework.

Markets imply around an 85% chance of a quarter-point rate cut at the Fed's meeting on September 17, and are pricing a further cut by December. 0#USDIRPR

"Fed Chair Jerome Powell will likely signal Friday that risks to employment and inflation are becoming more balanced, which would imply lowering policy rates toward neutral," wrote Andrew Hollenhorst, chief U.S. economist at Citi in a research note.

"But he will stop short of committing to a cut next month, awaiting jobs and inflation data for August."

The prospect of lower borrowing costs globally has underpinned stock markets, and Japan's Nikkei .N225 climbed to a fresh record high. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.1%, having scaled a four-year peak last week.

In Europe, Germany's DAX .GDAXI eased 0.3%. Britain's FTSE .FTSE was up 0.1%.

The rally in stocks has been underpinned by a solid earnings season as the S&P 500 EPS grew 11% on the year and 58% of companies raised their full-year guidance.

"Earnings results have continued to be exceptional for the mega-cap tech companies," said analysts at Goldman Sachs. "While Nvidia has yet to report, the Magnificent 7 apparently grew EPS by 26% year/year in 2Q, a 12% beat relative to consensus expectation coming into earnings season."

This week's results will provide some colour on the health of consumer spending, with Home Depot, Target, Lowe's and Walmart all reporting.

EYES ON FED POLICY

In bond markets, the yield curve steepened, with the gap between two-year and 10-year Treasury yields hitting 57.8 basis points US2US10=TWEB. That's the largest gap since mid-July.

Rates on the long end of the curve rose much faster than those on the front end, suggesting higher inflation expectations.

European bonds also have been pressured by the prospect of increased borrowing to fund higher defence spending, pushing German and French long-term yields to their highest since 2011.

Wagers on more Fed easing have weighed on the dollar, which dropped 0.3% against a basket of currencies last week and last stood at 98.102 =USD.

The dollar rose 0.4% versus the yen to 147.75 JPY=EBS, while the euro fell 0.3% to $1.1667 EUR=EBS.

In commodity markets, gold was flat at $3,335 an ounce XAU= after losing 1.9% last week. GOL/

Oil prices rose ahead of the meeting between Trump and Zelenskiy. O/R Brent LCOc1 was up 0.3% at $66.09 a barrel, while U.S. crude CLc1 stood at $63.09 per barrel, up 0.5%