* MSCI Asia ex-Japan drops 0.25%; Nikkei off 0.29%
* European shares seen flat at the open
* Gold firms on trade uncertainty, weak dollar
* U.S. Treasury yields remain near recent lows
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, June 28 (Reuters) - Asian shares stumbled on
Friday and gold jumped amid rising doubts that a highly
anticipated meeting between U.S. President Donald Trump and
Chinese President Xi Jinping this weekend could lead to an
easing of trade tensions.
Uncertainty over whether the talks will produce progress in
ending the year-long trade war between the world's two largest
economies comes amid signs of rising risks to global growth.
European shares are expected to tread water ahead of the
meeting. Financial spreadbetters see London's FTSE .FTSE
virtually unchanged at 7,404, Frankfurt's DAX .GDAXI 0.1%
firmer at 12,288, and Paris' CAC .FCHI 0.02% higher at 5,494
at the start of trade.
"I'm not sure the Americans can deliver what the Chinese
want and the Chinese don't want to deliver what the Americans
want," said Greg McKenna, strategist at McKenna Macro, adding
that he sees an "extend and pretend" outcome, in which Chinese
and U.S. officials agree to continue talks, as the most likely
outcome of the weekend meeting.
Regardless of the outcome, McKenna said, "we will not be in
a holding pattern on Monday morning."
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 0.25%. Japan's Nikkei stock index .N225
ended down 0.29%.
White House economic adviser Larry Kudlow said on Thursday
that Trump had agreed to no preconditions for the meeting, set
to take place on Saturday at the G20 summit in Japan, and is
maintaining his threat to impose new tariffs on Chinese goods.
Kudlow also dismissed a Wall Street Journal report that
China was insisting on lifting sanctions on Chinese telecom
equipment giant Huawei Technologies Co Ltd HWT.UL as part of a
trade deal and that the Trump administration had tentatively
agreed to delay new tariffs on Chinese goods. On Thursday, China's central bank pledged to support a
slowing economy as global risks rise, ahead of the release of
data that is expected to show China's factory activity shrank
for a second consecutive month in June. Chinese blue chips .CSI300 fell 0.64% on Friday and Hong
Kong's Hang Seng .HSI lost 0.62%. Australian shares .AXJO
shed 0.71%.
The losses followed gains in global equity markets
overnight. U.S S&P 500 e-mini stock futures ESc1 wavered on
Friday, trimming early gains to trade up just 0.05%.
"Central expectations for the G20 meeting between Trump and
Xi are that negotiations will resume, additional U.S. tariffs
will be delayed, China will buy more U.S. goods and talks over
tech-trade will gain renewed focus," analysts at ANZ said in a
note.
"However, as the difficulty of resolving economic
aspirations between the two countries is herculean, markets
remain cautious."
Seema Shah, global investment strategist at Principal Global
Investors, said even if signs of progress emerge on trade,
investors would quickly move on to U.S. interest rate policy.
"As the equity market is now fully pricing in a 50 basis
point cut, market disappointment could be significant ... And if
the Fed follows through with a cut despite a brighter trade
outlook? Beyond the knee-jerk euphoria, expect minimal market
reaction – this last scenario is exactly what the market is
already expecting," she said in a note.
On Thursday, the S&P 500 .SPX rose 0.38% and the Nasdaq
Composite .IXIC added 0.73%. The Dow Jones Industrial Average
.DJI eased 0.04%, dragged down by losses in Boeing Co BA.N
shares following a Reuters report that the U.S. Federal Aviation
Administration identified a new safety risk in the planemaker's
grounded 737 MAX aircraft. .N
Highlighting mixed market views on the outlook for the
weekend's Sino-U.S. talks, yields on benchmark 10-year Treasury
notes US10YT=RR rose to 2.0137%, compared with a U.S. close of
2.005% on Thursday, despite the reversal in equities.
The two-year yield US2YT=RR dipped to 1.7369%, less than 4
basis points above recent lows, reflecting near certainty that
the Federal Reserve will cut benchmark interest rates in July.
The dollar was 0.1% lower against the safe-haven yen at
107.67 JPY= , but the euro weakened slightly, buying $1.1362.
The dollar index .DXY , which tracks the greenback against
a basket of six major rivals, gained less than 0.1% to 96.232,
but was still up only about 0.4% from three-month lows hit
earlier this week.
In commodity markets, trade worries continued to weigh on
oil, with U.S. crude CLc1 losing 0.52% to $59.12 a barrel and
global benchmark Brent crude LCOc1 down 0.68% to $66.10 per
barrel.
The weak dollar and uncertainty over global trade saw gold
rebound after dipping below $1,400 per ounce on Thursday. Spot
gold XAU= was last traded at $1,416.19 per ounce, up 0.49%,
but down from earlier highs. GOL/
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