GLOBAL MARKETS-Asian shares ease into trade talks, Fed test

(Adds European futures, updates prices throughout)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Major indices mostly lower in Asia
* Market fully priced for 25 bp Fed cut, eyes on guidance
* No breakthrough seen at Sino-U.S. trade talks in Shanghai
* Dollar on top as U.S. economy outperforms peers

By Wayne Cole
SYDNEY, July 29 (Reuters) - Asian shares slipped on Monday
as markets anxiously counted down to a likely cut in U.S.
interest rates this week with much riding on whether or not the
Federal Reserve signals yet more are in the pipeline.
Futures for the pan-region Euro Stoxx 50 STXEc1 and
Germany's DAX FDXc1 were down about 0.2% in early deals,
though London's FTSE futures FFIc1 were a shade higher.
E-Minis for the S&P 500 ESc1 dipped 0.1%.
U.S. and Chinese trade negotiators also meet in Shanghai
this week for their first in-person talks since a G20 truce last
month, but expectations are low for a breakthrough. Data on the weekend showed profits earned by China's
industrial firms contracted in June, fuelling concerns that the
bruising trade war will drag on economic growth. "We remain cautiously optimistic that both sides can agree
on a narrow agreement that addresses important trade-related
issues, such as U.S. demands to increase exports," said analysts
at Barclays in a note.
"That said, we are sceptical about the prospects of a
broader agreement that includes the more challenging
security-related issues."
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 0.6% in slow trade. Japan's Nikkei .N225
dipped 0.2% and Shanghai blue chips .CSI300 0.1%.
Interest rate futures are fully priced for a quarter-point
rate cut from the Fed on Wednesday, with only a small chance of
a half-point move FEDWATCH .
More important will be what the central bank flags for the
future, given the market implies 100 basis points of easing over
the next year or so.
"The messaging will be key and will help markets determine
whether the rate cut is just an "insurance cut", or the Fed is
embarking on a full easing cycle as the market currently prices
in," said Tapas Strickland, director of economics at NAB.
He noted the solid reading on second-quarter U.S. economic
growth out last week would support those at the Fed arguing for
just one or two cuts. "The U.S. economy remains the least dirty t-shirt in the
global laundry basket. The dollar was stronger across the board
in response," said Strickland.
The dollar hit a two-month peak on a basket of currencies at
98.010 .DXY , and was last trading at 98.023.
The euro stood at $1.1125 EUR= on Monday, just above last
week's two-year trough around $1.1102, while the dollar edged
back to 108.62 yen JPY= .
The dollar had got a helping hand from White House economic
adviser Larry Kudlow who on Friday said the Trump administration
had "ruled out" intervening to push it lower. Sterling was pinned near 27-month lows around $1.2375
GBP=D3 amid reports the government of Prime Minister Boris
Johnson was preparing the ground for a "no-deal" Brexit.
Spot gold was flat at $1,418.00 per ounce XAU= .
Oil prices drifted down in early trade pressured by the
usual concerns about over supply and slowing world demand. O/R
Brent crude LCOc1 futures eased 33 cents to $63.13, while
U.S. crude CLc1 lost 17 cents to $56.03 a barrel.

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