* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei futures point to opening drop of over 3%
* Dollar slides on yen amid safe-haven rush
* Yuan under pressure as trade war escalates
* Gold jumps to fresh high at $1,548, oil slides
By Wayne Cole
SYDNEY, Aug 26 (Reuters) - Asian shares seemed set for a
turbulent start on Monday as the latest salvo in the U.S.-China
trade war shook confidence in the world economy and sent
investors steaming to the safe harbour of sovereign bonds and
the Japanese yen.
The Chinese yuan was also under pressure in early trade,
with the dollar quoted up at 7.1763 CNH=D3 and markets braced
for more intervention from Beijing to support the currency.
Nikkei futures NKc1 pointed to an opening fall of more
than 3%, while E-Mini futures for the S&P 500 ESc1 were
trading down 1.2%.
Wall Street nose-dived on Friday when President Donald Trump
announced a 5% additional duty on $550 billion in targeted
Chinese goods, hours after China unveiled retaliatory tariffs on
$75 billion worth of U.S. products. At the G7 meeting in France over the weekend, Trump caused
some confusion by indicating he may have had second thoughts on
the tariffs.
But the White House said on Sunday that Trump wished he had
raised tariffs on Chinese goods even higher last week, even as
he signalled he did not plan to follow through with a demand
that U.S. firms find ways to close operations in China.
"There is an uneasy feeling that the very fragile
negotiations are spiralling out of control," wrote analysts at
ANZ in a note.
"The escalation suggests uncertainty will continue to weigh
on global trade, industrial production and investment, with no
sign of a resolution."
The latest broadside overshadowed a pledge by Federal
Reserve Chair Jerome Powell to "act as appropriate" to keep the
U.S. economy healthy, although he stopped short of committing to
rapid-fire rate cuts. The markets clearly believe, however, the Fed will have to
act aggressively and are fully priced for at least a
quarter-point cut in September and more than 110 basis points of
easing by the end of 2020. FEDWATCH
YIELD INVERSION
Yields on 10-year Treasury notes US10YT=RR were down at
1.51%, having dived from a top of 1.66% on Friday, leaving them
just below two-year yields and inverting the curve again.
"We continue to remain long 10's, targeting 1.3% due to a
combination of weakness in the global economy and trade war
uncertainty filtering through into a weaker U.S. economy," said
Priya Misra, head of global rates strategy at TD Securities.
"This will force the Fed to ease beyond a 'mid-cycle
adjustment to policy'," he added. "We believe that the market is
underpricing the risks of additional rate cuts in 2020."
The drop in yields swept the legs out from under the dollar,
which slid 0.5% on Friday against a basket of currencies and was
last trading at 97.555 .DXY =USD .
It took a big hit on the yen, considered a safe haven thanks
to Japan's position as the world's largest creditor nation, and
was last down 0.7% at 104.60, having shed 1% on Friday.
The next major chart point is a low around 104.10 briefly
touched during the "flash-crash" of early January.
The euro was firm at $1.1151 EUR= , having climbed 0.6% on
Friday, although restrained somewhat by speculation the European
Central Bank will also have to ease aggressively next month.
Spot gold got a boost from the slide in the dollar and
yields, rising 1.3% to $1,546.51 per ounce XAU= .
Oil prices went the other way on worries the tariffs dispute
would crimp world demand. O/R
Brent crude LCOc1 futures slid 91 cents to $58.43, while
U.S. crude CLc1 lost 98 cents to $53.19 a barrel.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>