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GLOBAL MARKETS-Asian shares fall on recession fears; eyes on Fed minutes

Published 21/08/2019, 01:50
© Reuters.  GLOBAL MARKETS-Asian shares fall on recession fears; eyes on Fed minutes
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* Asian stock markets : https://tmsnrt.rs/2zpUAr4

* MSCI ex-Japan down 0.2%; Nikkei falls 0.7%

* U.S. President Trump says he had to 'take China on'

* Eyes on Fed minutes, Jackson Hole meeting

By Swati Pandey

SYDNEY, Aug 21 (Reuters) - Asian shares fell on Wednesday as

fresh worries about a global recession led investors to dump

risky assets, with U.S. President Donald Trump showing no signs

of backing down in his trade war with China.

Trump said on Tuesday he had to confront China over trade

even if it caused short-term harm to the U.S. economy because

Beijing had been cheating Washington for decades. His strongly worded remarks came hours before his government

announced approval of an $8 billion sale of Lockheed Martin (NYSE:LMT)

LMT.N F-16 fighter jets to Taiwan, a move sure to draw

Beijing's ire and further dim prospects for a quick trade deal.

MSCI's broadest index of Asia-Pacific shares outside Japan

.MIAPJ0000PUS eased 0.2%, snapping three straight days of

gains.

Japan's Nikkei .N225 slipped 0.6%, Australian shares

.AXJO were 0.8% lower and South Korea's KOSPI index .KS11

was a shade weaker.

On Wall Street, the Dow .DJI and the Nasdaq .IXIC fell

0.7% each while the S&P 500 .SPX lost 0.8%. Some analysts expect a further correction in world shares,

which are still above their December lows.

Aside from the trade war, political turmoil in Hong Kong,

Britain and Italy have also heightened uncertainties for

investors. The prospect of new elections in Italy after the

resignation of Prime Minister Giuseppe Conte added to jitters,

sending Italian sovereign bond yields sliding.

The key for markets now is whether pledges for more

accommodative policy from Germany to China are enough to assuage

concerns about the state of the global economy and end fears of

recession.

The immediate focus shifts to the minutes of the Fed's most

recent meeting, due on Wednesday. Traders are also awaiting the

central bank's Jackson Hole seminar later this week and a Group

of Seven summit this weekend for clues on what additional steps

policymakers will take to boost economic growth.

Morgan Stanley (NYSE:MS) economist Ellen Zentner advised clients to

watch for the use of the word "somewhat" when Fed Chair Powell

describes further policy adjustments.

"Acknowledgment that downside risks have increased with no

characterisation of 'somewhat' could be taken as confirmation

that it is likely the Fed makes a larger cut in September,"

Zentner wrote in a note.

Investors are pricing in a 16% chance of a 50 basis point

cut to U.S. Fed funds rate in September.

MORE STIMULUS

Alarm bells started ringing last week when U.S. 2-year

yields traded above those of their 10-year counterparts for the

first time since 2007, an inversion that has presaged previous

recessions and is widely watched by markets.

Most fund managers and economists expect global policy

stimulus to prevent the world from tipping into recession.

Supporting that belief, Reuters reported earlier Trump and his

advisers are examining ways to provide a boost to the U.S.

economy should it be deemed necessary. In addition, the central banks of the euro zone, Australia

and China are all expected step open the monetary spigot further

this year while Germany is considering fiscal stimulus.

Those prospects have driven yields lower. Benchmark U.S.

10-year Treasuries US10YT=RR rose on Tuesday to yield 1.540%

from a high of 1.625% on Monday.

However, currency markets were mostly subdued ahead of the

Jackson Hole meeting and Fed minutes. The Japanese yen was

little changed at 106.24 per dollar after firming 0.4% versus

the greenback on Tuesday, while sterling GBP=D3 was last

trading at $1.2162.

The euro EUR= trod water near Tuesday's high of $1.1101.

The dollar index .DXY was on the defensive as it drifted

away from a three-week top touched earlier on Monday. It was

last flat at 98.208.

In commodities markets, U.S. crude CLc1 dipped 2 cents to

$56.11 per barrel while Brent LCOc1 added 5 cents to $60.08.

Spot gold XAU= was a shade weaker at $1,506.14 an ounce.

Asia stock markets https://tmsnrt.rs/2zpUAr4

Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA

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(Editing by Sam Holmes)

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