LONDON, SYDNEY, Jan 3 Reuters Global stock markets extended a New Year slide on Wednesday, while the dollar stayed strong, as market optimism about early U.S. interest rate cuts ebbed and the latest escalation of hostilities in the Middle East weighed on sentiment.

MSCI39;s broad index of world equities was 0.2 lower, following a 0.8 fall on Tuesday, a weak start to 2024 that may herald the end of the blistering gains for stocks and bonds that began late last year.

Europe39;s STOXX 600 share index dipped 0.1 and Asia Pacific shares outside Japan fell 1.3.

Caution was dominating markets ahead of the release of minutes from the U.S. Federal Reserve39;s December meeting, due at 1900 GMT on Wednesday as well as a slew of important U.S. data.

Fed officials in December predicted 75 basis points bps of rate cuts in 2024, driving money market bets for around double that amount of cuts that prompted a crossmarket yearend rally.

We had that whacking great rally at the end of last year when markets convinced themselves there would be a soft economic landing, cooling inflation and a rapid pivot to rate cuts, AJ Bell investment director Russ Mould said.

But if you get an unexpected hard landing or an inflationary boom, you might get a slightly different script, so I guess people are now pausing for reflection.

Futures markets still see a 70 chance of the Fed starting to lower U.S. borrowing costs from their current 22year high from March. But Reuters analysis of Fed…