GLOBAL MARKETS-Asian shares struggle for traction as Fed cut fails to boost confidence

* Fed cut fails to halt slide; S&P 500 drops 2.8%

* Australia down 1.3%, Nikkei up 0.5% in choppy trade

* Dollar slides vs Asian currencies

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, March 4 (Reuters) - Asian shares struggled to

find footing on Wednesday and bonds held stunning gains, as an

emergency rate cut from the U.S. Federal Reserve seemed to stoke

rather than soothe fears over the coronavirus' widening global

economic fallout.

The surprise 50 basis point cut came with commentary

highlighting the limits of monetary policy, and Wall Street

indexes fell sharply. Gold surged and the dollar sank. .N

The yield on benchmark 10-year U.S. Treasuries, which falls

when prices rise, hit a once unimaginable low of 0.9060% and has

held just above that level in Asian trade. US/

MSCI's broadest index of Asia-Pacific shares outside Japan

.MIAPJ0000PUS rose 0.4% amid choppy trade across the region,

though most of the gains were confined to South Korea. Japan's

Nikkei .N225 oscillated between flat and modest gains.

"The U.S. Federal Reserve's attempt to surprise the market

may have misfired," said Kerry Craig, strategist at J.P. Morgan

Asset Management in Melbourne.

"While the action was intended to steady market confidence,

the sharpness of their reaction and the off-schedule timing of

the move could be interpreted as the Fed being much more

concerned about the economic impact than first thought."

Australia's S&P/ASX 200 index .AXJO fell 1.5%, while

stocks in Hong Kong and China traded flat. Korean stocks .KS11

bucked broader weakness, rising 2% after the government

announced a stimulus package of 11.7 trillion won ($9.8 billion)

to mitigate the impact of the virus outbreak. Futures for the S&P 500 ESc1 were volatile as the results

of Democratic Party primaries came in, eventually firming 1% as

moderate Joe Biden looked set to win five big states compared

with two for radical Bernie Sanders.

The U.S. 10-year Treasury yield US10YT=RR steadied at

0.9861%.

The dollar touched a five-month low against the safe-haven

Japanese yen JPY= and slipped against most other Asian

currencies. FRX/

"Given the way that the market's reacted, it's telling you

that there's a little bit of panic," said Andrew Gillan, head of

Asia ex-Japan equities at Janus Henderson in Singapore.

"They're a bit worried that interest rate cuts are not going

to make a massive difference...and what's going to be required

is probably going to be more fiscal stimulus," he said, his fund

having invested, for example, in Chinese cement and construction

stocks in anticipation of more government support measures.

LIMITS OF MONETARY POLICY

The Fed's surprise move - its first off-schedule cut since

the depths of the financial crisis more than a decade ago -

followed a massive shift in money market pricing. Futures swung rapidly late last week to expect such a cut at

the Fed's March meeting. Now they imply another 50 basis points

of easing by July, even as the investors and the Fed itself

raise questions about the efficacy of easing to deal with a

public health crisis. 0#FF:

"We do recognise that a rate cut will not reduce the rate of

infection, it won't fix a broken supply chain; we get that," Fed

Chairman Jerome Powell told reporters at a press conference.

The remark sent Wall Street from positive territory into the

red. Dow Jones industrial average .DJI , Nasdaq composite

.IXIC and S&P 500 .SPX each closed down close to 3%.

More than 3,000 people have been killed by the coronavirus,

about 3.4% of those infected - far above seasonal flu's fatality

rate of under 1%.

It continues to spread quickly beyond the epicentre in

China, with Italy overnight reporting a jump in deaths to 79 and

South Korea reporting more than 500 new cases on Wednesday.

"The question here is whether a conventional interest rate

response is sufficient," said Sameer Goel, chief strategist,

Asia macro, at Deutsche Bank in Singapore.

"It's not an economic shock, it's a shock driven by a

non-economic factor. It's still not clear how big the problem

ultimately is, or could be, and until you know that, it's hard

to know how much medicine to apply to it."

In currencies, the U.S. dollar fell across the board,

sending it to an eight-week low against a basket of currencies

=USD , while pushing the euro EUR= to an eight-week peak.

In Asian trade, the yen hit its highest against the

greenback since October, at 106.84 per dollar, before paring

gains. The Australian dollar AUD=D3 advanced to $0.6603.

Oil prices firmed on expectations of production cuts, with

Brent rising 90 cents to $52.79 per barrel LCOc1 and U.S.

crude up 1.9% at $48.06 a barrel CLc1 . O/R

Gold rose 0.2% to $1642.21 an ounce XAU= . GOL/

(Editing by Sam Holmes and Kim Coghill)