GLOBAL MARKETS-Asia stocks snap winning streak, bonds rally on downbeat Fed

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Ex-Asia stocks retreat after 10 sessions of gains
* Fed cautious on economy, ready to take further action
* Bonds rally as Fed mulls yield curve control, guidance
* Dollar comes off three-month lows as risk appetite wanes

By Wayne Cole
SYDNEY, June 11 (Reuters) - Asian shares retreated on
Thursday as a gloomy outlook from the U.S. Federal Reserve
challenged market optimism on the global economy, while bonds
rallied on speculation that yet more stimulus would be needed to
ensure recovery.
After a slow start, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS slipped 1.4%, likely
putting an end to a 10-session winning streak.
Japan's Nikkei .N225 slid 2.1% in its largest daily loss
in five weeks, while Chinese blue chips .CSI300 eased 1.0%.
E-Mini futures for the S&P 500 ESc1 fell 1.5% to extend an
overnight pullback on Wall Street, while EUROSTOXX 50 futures
STXEc1 lost 2.2% and FTSE futures FFIc1 1.7%.
In a reality check to the stock market's recent euphoria,
the Fed predicted the U.S. economy would shrink 6.5% in 2020 and
unemployment would still be at 9.3% at year's end. Data out earlier had also shown core U.S. consumer prices
fell for a third straight month in May, the longest stretch of
declines on record. As a result, Fed Chair Jerome Powell said he was "not even
thinking about thinking about raising rates". Instead, he
emphasised recovery would be a long road and that policy would
have to be proactive with rates near zero out to 2022.
"While Powell did not commit to any new action at this time,
his focus on downside risk and uncertainty reinforces the
message that they will take further action, probably by
September," JPMorgan economists said.
"Outcome or calendar based guidance looks likely and Powell
left the door open for moving to some form of interest rate
caps."
Powell confirmed the Fed was studying yield curve control, a
form of easing already employed by Japan and Australia.
All of which, saw yields on 10-year Treasuries US10YT=RR
fall 9 basis points on Wednesday, the biggest daily drop in
almost two months. Yields were down at 0.71% on Thursday, a
sharp rally from last week's peak of 0.96%. US/
The risk of more easing initially had the U.S. dollar under
pressure, seeing it touch a three-month low on a basket of
currencies at 95.714 =USD .
"The Fed's view – that you'll be paid almost nothing for
holding U.S. dollars until at least 2022 – is never going to be
helpful for any currency," noted analysts at CBA.
The dollar later steadied as risk appetite waned and stocks
came off. It was last at 107.20 yen JPY= , after hitting a
one-month trough at 106.87.
The euro edged back to $1.1339 EUR= , having hit its
highest since mid-March on Wednesday at $1.1422.
The prospect of super-low rates for longer had been a boon
for gold overnight, but it ran into selling in Asia falling 0.4%
to $1,728 an ounce XAU= . GOL/
Oil prices turned lower amid renewed concerns about demand
and after U.S. data showed crude inventories had risen to record
highs. O/R
Brent crude LCOc1 futures fell $1.27 to $40.46 a barrel,
while U.S. crude CLc1 lost $1.41 to $38.18.

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(Editing by Sam Holmes & Shri Navaratnam)