GLOBAL MARKETS-Asian shares gain in cautious mood as U.S.-China tensions rise

By Swati Pandey
SYDNEY, July 15 (Reuters) - Asian shares rose on Wednesday
led by coronavirus vaccine hopes though sentiment was cautious
after Beijing vowed retaliatory sanctions against the United
States, while the euro rose to a four-month high ahead of a
crucial EU summit.
The signal for European markets was strong with futures for
eurostoxx 50 STXEc1 up 1.3% while those for Germany's DAX
FDXC1 added 1.3% and futures for London's FTSE FFIc1 climbed
1%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was last up 0.8%, not far from a recent
five-month peak.
Chinese shares sold off, with the blue-chip CSI300 index
.CSI300 flat and Shanghani's SSEC .SSEC off 0.3%. Hong
Kong's Hang Seng index .HSI ticked up after spending most of
the day in the red.
Japan's Nikkei .N225 and Australia's benchmark index
remained upbeat though, and were up 1.6% and 1.9%, respectively.
E-mini futures for the S&P 500 EScv1 gave back some of
their gains but were still up 0.8%.
U.S. President Donald Trump on Tuesday ordered an end to
Hong Kong's special status under U.S. law to punish China for
what he called "oppressive actions" against the former British
colony, prompting a warning from China. On Wednesday, China's foreign ministry said in a statement
Beijing will impose retaliatory sanctions against U.S.
individuals and entities in response to the law targeting banks
doing business with Chinese officials, though the statement
released through state media did not reference Trump's executive
order.
"Hong Kong affairs are purely China's internal affairs and
no foreign country has the right to interfere," the ministry
said.
Overnight risk appetite was boosted by Moderna Inc's
MRNA.O experimental vaccine for COVID-19 which showed it was
safe and provoked immune responses in all 45 healthy volunteers
in an early-stage study. On Tuesday, the Dow Jones Industrial Average .DJI rose
over 2%, while the S&P 500 .SPX gained 1.34% and the Nasdaq
Composite .IXIC climbed 0.94%. .N
Stocks firmed despite rising Sino-U.S. tensions and three
U.S. states reporting new record daily deaths from the pandemic.
"Markets have traded sideways for over a month as bulls and
bears move their bishops and horses out on the chess board and
then hoard them back in when the other side makes a move. The
net result has been a prolonged stalemate," said Perpetual
analyst Matthew Sherwood.
"Forward-looking assumptions about COVID-19 treatments and
vaccine offset what is happening today in terms of rising case
numbers and an unwinding or stalling of re-opening plans."
The dollar was on the defensive, particularly against
risk-sensitive currencies, following news of progress in vaccine
development.
The euro EUR=EBS went as high as $1.1423, its strongest
since March 10 and not far off its peak so far this year of
$1.1495. It was last at $1.1395.
The single currency has been helped by hopes the European
Union could agree at its summit later this week on a rescue
financing package that will limit the economic damage to the
bloc from the pandemic.
The yen was little moved at 107.21 per dollar JPY= , off a
two-week high of 106.635. The Bank of Japan kept monetary policy
steady as expected, though it warned that uncertainty over the
economic outlook was "extremely high" due to various risks,
including rising coronavirus infections in the capital Tokyo.
The risk-sensitive Australian dollar, too, pared gains to be
last up 0.2% at $0.6990 AUD=D4 .
There were signs of wariness among investors, as yields on
leading U.S. and euro zone government debt fell and safe-haven
gold prices solidified gains above $1,800 an ounce.
Spot gold XAU= rose to $1,809 an ounce.
Oil prices rose on Wednesday after a sharp drop in U.S.
crude inventories. Brent crude LCOc1 futures were up 24 cents
at $43.14 a barrel, and U.S. crude CLc1 futures rose 22 cents
to $40.50 a barrel. O/R

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(Reporting Swati Pandey in Sydney and Pete Schroeder in
Washington; Editing by Jacqueline Wong and Kim Coghill)