GLOBAL MARKETS-Asia shares pause near highs, eyes on U.S. yields

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei slips as Japan reports record drop in GDP
* Rise in long-term US yields offers some support to dollar
* Gold soft after suffering worst week since March

By Wayne Cole
SYDNEY, Aug 17 (Reuters) - Asian shares dozed near recent
highs in quiet trade on Monday as investors waited to see if the
recent sell-off in longer-dated U.S. Treasuries would extend,
and maybe take some pressure off the beleaguered dollar.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was 0.02% lower at 562, but still eyeing the
January top of 574.52.
Japan's Nikkei .N225 dipped 0.4% after touching a
six-month peak on Friday, as the country suffered its biggest
economic contraction on record in the second quarter.
E-Mini futures for the S&P 500 ESc1 firmed 0.25% in early
trade to be just below its record close of 3,386.15. .N
The U.S. second-quarter earnings season wraps up with the
major retailers reporting this week, including Walmart Inc
WMT.N , Home Depot Inc HD.N and Kohls Corp KSS.N .
Politics will be a feature as the Democratic National
Convention kicks off the 2020 presidential election season.
Sino-U.S. relations remain a sticking point with U.S.
President Donald Trump on Saturday saying he could exert
pressure on more Chinese companies such as technology giant
Alibaba BABA.N after he moved to ban TikTok. U.S. crude oil shipments to China will rise sharply in
coming weeks, as the world's two top economies gear up to review
their January deal after a prolonged trade war. News that the scheduled review of the U.S.-China Phase-One
trade deal over the weekend had been postponed indefinitely
didn't elicit much of a reaction.
The highlight of the economic calendar will be the release
of the minutes from the Federal Reserve's last policy meeting.
"Market participants will be looking for insight into the
details and exact timing of when the Fed's Monetary Policy
Review will be completed, and also for more clarity with respect
to the potential timing and structure of any changes to forward
guidance," noted analysts at NatWest Markets.
Speculation is rife the Fed will adapt an average inflation
target which would seek to push inflation above 2% for some time
to make up for the years it has run below it.
That combined with massive new debt supply caused a sharp
increase in longer-term bond yields last week with 30-year
yields US30YT=RR rising 21 basis points as the curve
steepened.
The lift in yields gave the dollar some respite after weeks
of losses. Against a basket of currencies the dollar was a
fraction lower at 93.0-08 =USD , still uncomfortably close to
the recent trough of 92.521.
The euro EUR= flattened out a little late last week having
met resistance around the two-year peak of $1.1915. Yet it still
ended the week with a gain of 0.5% and was last trading at
$1.1844.
"Investors strategically long EUR/USD should stick to the
position," said CBA forex analyst Elias Haddad. "Greater
Eurozone fiscal solidarity, real two-year swap rate
differentials and relative central bank balance sheet trends
between the Eurozone and the U.S. suggest the fundamental
uptrend in EUR/USD is intact."
"EUR/USD is still undervalued relative to the value implied
by price deflator differentials which pegs "fair value" at
around $1.2300."
The single currency has also made a notable break higher on
the yen EURJPY= to reach ground not trod since April 2019.
Indeed, the yen fell against most of its peers last week, with
the dollar holding at 106.59 yen JPY= on Monday.
In commodity markets, gold eased 0.4% to $1,935 an ounce
XAU= , after the jump in bond yields saw it lose 4.5% last week
in its worst performance since March. GOL/
Oil prices edged ahead after data showed crude oil,
gasoline, and distillate inventories all declined in the
week-ending August 7. O/R
Brent crude LCOc1 futures rose 33 cents to $45.13 a
barrel, while U.S. crude CLc1 gained 39 cent to $42.40.

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(Editing by Lincoln Feast)