Adds closing U.S. stocks, U.S. crude settlement, other market details

By Herbert Lash and Alun John

NEW YORK/LONDON, May 9 (Reuters) -A gauge of global equities fell on Tuesday as investors grew cautious ahead of key data on U.S. consumer prices, while the impasse over the U.S. debt ceiling sparked a sharp sell-off in short-dated Treasury bills.

Disappointing forecasts from companies such as PayPal and Apple supplier Skyworks weighed on sentiment as markets awaited a meeting between President Joe Biden and top Republican lawmakers about raising the $31.4 trillion debt ceiling.

Investors fear a government default as early as June 1 if Congress fails to resolve the deadlock. Failure to raise the limit would cause a huge hit to the U.S. economy and weaken the dollar as the world's reserve currency, Treasury Secretary Janet Yellen warned on Monday.

"If Janet Yellen is right about the early June date, you got to be careful about the shorter-dated bills. Our calculation shows she's not incorrect," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.

The yield on 1-month Treasury bills US1MT=RR surged 23.8 basis points to hit a high of 5.689% and yields on 2-month bills US2MT=RR climbed to a high of 5.283% as investors sold off notes that mature about the time the debt limit could be hit.

Yields on both T-bills slid later while longer-dated Treasury yields edged higher as investors waited for a reading of the U.S. consumer price index on Wednesday that may alter market speculation on when the Fed might cut interest rates.

The market is focused on core CPI and if that remains elevated it would challenge the market's belief that the Fed will cut rates sooner rather than later, said Kevin Flanagan, head of fixed income strategy at WisdomTree.

"I wouldn't be surprised to see the market come off a bit," he said. "Treasury yields I would argue came down too much too soon."

The market expects the CPI index to have gained 0.4% in April from the month before and 5.5% from a year earlier on a non-seasonally adjusted basis, a Reuters poll of economists shows.

The two-year US2YT=RR Treasury yield, which typically moves in step with interest rate expectations, rose 1.2 basis points to 4.024%.

The dollar edged higher against major currencies, with the dollar index =USD up 0.168%.

MSCI's gauge of global equity performance .MIWD00000PUS closed down 0.46% after customs data showed China's imports contracted sharply in April, while exports rose at a slower pace, reinforcing signs of feeble domestic demand.

"When it comes to the Chinese market, you have the question coming from investors now about the strength of the recovery," said Frank Benzimra, Societe Generale's Hong Kong-based head of Asian equity strategy.

A string of downbeat corporate updates soured sentiment in Europe, leading the pan-regional STOXX 600 index .STOXX to lose 0.33%.

The Dow Jones Industrial Average .DJI fell 0.17%, the S&P 500 .SPX lost 0.46% and the Nasdaq Composite .IXIC dropped 0.63%.

Oil prices ticked up and reversed a more than 2% drop earlier in the session as markets weighed U.S. government plans to refill the nation's emergency oil reserve and anticipated higher seasonal demand.

Brent crude LCOc1 settled up 43 cents, or 0.6% higher, at $77.44 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 closed up 55 cents or 0.8% at $73.71.

Gold gained as investors sought cover from economic uncertainty while positioning for the U.S. inflation data for clues on the trajectory of interest rates.

U.S. gold futures GCv1 settled 0.5% higher at $2,042.90 an ounce.

Reporting by Herbert Lash in New York
Additional reporting by Alun John in London, Kevin Buckland in Tokyo
Editing by Mark Heinrich and Matthew Lewis

https://www.reuters.com/markets/ For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/