* MSCI world index stays near 21-month high
* Investors expect Fed to cut rates, focus on policy outlook
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Hideyuki Sano
TOKYO, Oct 30 (Reuters) - Asian share markets slipped on
Wednesday, as the prospect of a rate cut by the Federal Reserve
was countered by worries a Sino-U.S. first-stage trade deal
could be delayed.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS shed 0.33% from Tuesday's three-month high while
Japan's Nikkei .N225 lost 0.35% after hitting a one-year high
the previous day.
On Wall Street overnight, the S&P 500 index touched a record
intraday high, led by strong earnings from drug manufacturers
such as Merck MRK.N and Pfizer PFE.N , before ending down
0.08%.
Markets had erased gains after Reuters reported a U.S.
administration official said an interim trade agreement between
Washington and Beijing might not be completed in time for
signing in Chile next month as expected. A disappointing profit report from Google parent Alphabet
GOOGL.O kept the technology-rich Nasdaq in the red, with the
Nasdaq Composite .IXIC falling 0.59%.
MSCI's gauge of stocks across the globe .MIWD00000PUS
slipped 0.06% in Asia on Wednesday from a 21-month high reached
on Tuesday.
Since U.S. President Donald Trump outlined what he called
the first phase of a trade deal with China earlier this month,
investors have bet on a trade truce between the two countries,
driving global equities higher.
Expectations of further U.S. monetary policy loosening also
emboldened investors, with a reduction of 0.25 percentage point
later in the day almost seen as a done deal.
"With a cut today completely priced in, markets are looking
to the Fed's stance on its policy outlook," said Masahiro
Ichikawa, senior strategist at Sumitomo Mitsui DS Asset
Management.
While Fed funds rate futures 0#FF: fully price in a 25-
basis-point cut on Wednesday, only about a 30% chance of another
cut in December has been priced in, compared with about 70%
earlier this month.
"I think the Fed will clearly indicate that a rate cut in
December is not its main scenario," said Tomoaki Shishido, macro
strategist at Nomura Securities.
Fading expectations of aggressive rate cuts by the Fed have
lifted the two-year U.S. bond yield to 1.644% US2YT=RR ,
compared with a two-year low of 1.368% in early October.
The 10-year U.S. Treasuries yield stood at 1.833%
US10YT=RR , near a 1-1/2-month high of 1.860% touched earlier
this week.
That has helped to lift the dollar against the yen. The
dollar was traded at 108.86 yen JPY= , after having hit a
three-month high of 109.07 yen
The euro stood at $1.1107 EUR= , having bounced off from
Tuesday's low of $1.10735.
Sterling wobbled after Britain decided to hold an election
on Dec. 12 following Prime Minister Boris Johnson winning
approval from parliament for an early ballot aimed at breaking
the Brexit deadlock. While Johnson seeks to gain a parliamentary majority to
ratify his Brexit deal, the election would be highly
unpredictable as Brexit has fatigued and enraged swathes of
voters, while eroding traditional loyalties to the two major
parties, Conservative and Labour.
The currency last traded at $1.2861 GBP=D4 .
Oil prices slipped after an industry report that stocks at
the Cushing delivery hub for the benchmark rose last week,
shrugging off a drop in overall inventories.
U.S. West Texas Intermediate (WTI) crude CLc1 lost 0.47%
to $55.28 per barrel while international benchmark Brent crude
LCOc1 futures dropped 0.19% to $61.47 a barrel.
(Editing by Jacqueline Wong and Richard Borsuk)