GLOBAL MARKETS-Asian shares on shaky footing amid elevated valuations, oil skids

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Japan's Nikkei falls, Chinese shares in red
* MSCI ex-Japan barely changed after two straight days of
losses
* Currency market action muted
* Oil falls more than $1 after Saudi price cuts

By Swati Pandey
SYDNEY, Sept 7 (Reuters) - Asian shares were on the
defensive on Monday as investors grappled with sky-high
valuations against the backdrop of a global economy in the grip
of a deep coronavirus-induced recession while oil prices dropped
sharply.
Chinese stocks started lower while shares of Hong
Kong-listed Semiconductor Manufacturing International Corp
0981.HK (SMIC) plunged to the lowest since June 16 on fears
the firm could be added to a U.S. trade blacklist. China's blue-chip index .CSI300 slipped 0.5% and Hong
Kong's Hang Seng .HSI eased 0.2%.
Japan's Nikkei .N225 fell 0.4% with SoftBank 9984.T
coming under heavy selling following media reports it has spent
at least $4 billion buying call options on listed U.S.
technology stocks. Australian shares .AXJO , which had opened in the red,
reversed losses to edge up 0.1% led by miners, while South Korea
.KS11 added 0.4%.
That left MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS barely changed after two straight
days of losses toppled it from a 2-1/2-year peak last week.
World shares .MIWD00000PUS hit a record high last week as
central bank stimulus drove asset valuations to heady levels.
The rally has since cooled as tech stocks sold off while worries
over patchy economic recovery dogged investors.
The immediate focus on the day will be on China's exports
and imports data for August, due later in the morning.
China's exports are expected to have posted a second month
of solid gains in August as more of its trading partners relaxed
coronavirus lockdowns and reopened their economies, a Reuters
poll showed. U.S. stock futures opened in the red, with E-minis for the
S&P 500 ESc1 down 0.3% and Nasdaq futures NQc1 sliding 1.1%.
U.S. markets will be closed on Monday for Labor Day.
Nasdaq futures were dragged lower by the exclusion of Tesla
TSLA.O from a group of companies that were being added to the
S&P 500.
Analysts at Jefferies expect the equities market correction
to extend further.
"Our risk indices have begun to turn from their euphoria
highs," Jefferies said.
"It is not unthinkable that global equities are set to churn
in a range for a while as some of the orphan sectors/countries
are refranchised while the richly valued sectors pause or
unwind," it added.
"On the balance of probabilities, last week's correction has
further room to go."
Jefferies said it was switching its weighting on MSCI All
World index to "tactically bearish" in the short term.
It noted that a gauge of volatility .VIX has nudged higher
in the past three months alongside a steepening in U.S. 10-year
to 5-year Treasury yield curve as well as the 30-year to 5-year
curve.
"We wonder how much moves in both would upset the equity
market," Jefferries said.
Later this week, investors will look for data on U.S.
inflation with both producer and consumer prices expected to
remain mostly steady.
"With slack in the labor market and broader economy to
remain for years, it's hard to see where sustainably higher
inflation will come from," Brown Brothers Harriman said in a
note.
"That said, the bottom line is that U.S. rates will stay
lower for longer. Full stop."
In commodities, oil prices dropped more than $1 a barrel,
hitting their lowest since July, after Saudi Arabia made the
deepest monthly price cuts for supply to Asia in five months.
O/R
Fading optimism about demand recovery amid the coronavirus
pandemic also weighed. U.S. crude CLc1 fell 1.3% to $39.24 a
barrel. Brent crude LCOc1 skidded 1.1% to $42.16.
Policy meetings at the Bank of Canada on Wednesday and the
European Central Bank (ECB) the following day are also on
investors' radar, with both expected to keep policy steady.
Action in the forex market was muted.
In currencies, the dollar was flat against the yen at 106.27
JPY= ahead of a heavy week of macroeconomic data with figures
on household spending, current account and gross domestic
product due on Tuesday.
The euro held at $1.1838 while the British pound GBP= was
a 0.3% weaker at $1.3241 ahead of a new round of Brexit talks
with the European Union on Monday.

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(Editing by Shri Navaratnam)