* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asian shares seen falling, dollar index jumps
* Fed cuts rates by 25 basis points, further cuts not
certain
* U.S. Treasury yield curve flattens
By Swati Pandey
SYDNEY, Aug 1 (Reuters) - Asian shares fell to six-week lows
on Thursday and the dollar rose after the U.S. Federal Reserve
delivered a 25-basis-point rate cut as expected but poured cold
water on market expectations of a lengthy easing cycle.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slid 0.4%, extending losses for a fifth day to
the lowest since mid-June.
Japan's Nikkei .N225 also fell 0.4%. South Korea's KOSPI
.KS11 slipped 0.5% while Australian shares .AXJO declined
0.3%.
E-minis for the S&P500 ESc1 were off 0.4% in Asian hours.
"Interest rate cuts normally boost share market sentiment.
But financial markets reacted negatively after the Federal
Reserve cut interest rates for the first time since December
2008," said Craig James, chief economist at CommSec.
"In his press conference, Fed Chair Jerome Powell was more
'hawkish' than expected, wrong-footing traders who were hoping
for a more 'dovish' cut i.e. more explicit confirmation of
further policy easing," James added.
Speaking in a news conference after the release of the
central bank's statement, Powell characterised the rate cut as
"a mid-cycle adjustment to policy", citing signs of a global
slowdown, simmering U.S. trade tensions and a desire to boost
too-low inflation. Markets took that as a sign that sharp
further cuts were not imminent. Later in a news conference, Powell said Wednesday's move was
"not the beginning of a long series of rate cuts", sending U.S.
equity markets into a tailspin and dollar to its highest since
May 2017 against a basket of six major currencies. .DXY
Financial markets had been expecting more cuts by year-end,
though some analysts said extended easing did not appear to
warranted for now given robust U.S. consumer spending and a
strong labour market.
Overnight, the Dow .DJI and the Nasdaq .IXIC lost 1.2%
each while the S&P 500 .SPX declined 1.1%. MSCI's gauge of
stocks across the globe .MIWD00000PUS slipped to a five-week
low. .N
"By not coming out and promising more cuts in the future,
the market appears to have interpreted this policy move as
hawkish," said John Velis, forex and macro strategist at BNY
Mellon.
"SLOWBALIZATION"
U.S. Treasuries reacted to Powell's remarks by flattening
the yield curve as the front-end of the market US2YT=RR scaled
back on prior expectations for at least a 100 basis points of
easing in the near-term.
Notably, yields on 10-year bonds US10YT=RR too came under
pressure, suggesting "the market thinks the Fed is making a
policy mistake by not being more dovish," National Australia
Bank analysts wrote in a note.
Further hurting sentiment, the United States and China ended
a round of meetings without much progress on their ongoing
tariff war. "The broader global trade dynamic remains a challenge,"
Morgan Stanley strategist Michael Zezas said, referring to trade
skirmishes between Japan and South Korea and ongoing U.S.-Europe
negotiations over auto tariffs.
"Slowbalization appears intact and trade should continue to
drag on corporate confidence, capex and global growth in the
near term."
In foreign exchange, the dollar rose against the euro and
Antipodean currencies on expectations monetary policies in
Europe, Australia and New Zealand will remain accommodative.
The dollar index .DXY finished July 2.5% higher.
The common currency EUR= hit a more than two-year trough
of $1.1058 overnight and was last at $1.1061.
The Aussie AUD=D3 held at $0.6835 after falling to
$0.6832, its lowest since early January when a currency "flash
crash" briefly took it to $0.6715.
The kiwi NZD=D3 held at $0.6561 as markets wager on a rate
cut by the Reserve Bank of New Zealand next week.
Against the Japanese yen JPY= , the dollar broke above 109
to jump to the highest since end-May.
In commodities, crude oil futures settled higher on
Wednesday for the fifth straight day, buoyed by a
bigger-than-expected drop in U.S. inventories, but the stronger
dollar helped bring prices down from session highs in post
settlement trading. O/R
U.S. crude futures CLc1 fell more than $1 to $57.56 per
barrel. Brent was down $1.10 at $63.95.
Spot gold XAU= made a new two-week trough on Thursday
after falling to 1,399.75.
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Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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(Editing by Sam Holmes & Kim Coghill)