* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Asia ex-Japan sell-off, Australia at five-week low, Nikkei
slips
* Strong U.S. payrolls temper Fed rate cut expectations
* Turkish lira near 2-week lows on c.bank independence
worries
By Swati Pandey
SYDNEY, July 8 (Reuters) - Asian shares were a sea of red on
Monday after strong U.S. job gains tempered expectations the
Federal Reserve will deliver a large rate cut, while the Turkish
lira hovered near two-week lows on worries about central bank
independence.
Share sentiment was also dampened by U.S. investment bank
Morgan Stanley's decision to reduce its exposure to global
equities due to misgivings about the ability of policy easings
to offset weaker economic data.
The dour mood extended beyond Asia with the pan-region Euro
Stoxx 50 futures STXEc1 opening 0.4% lower while Germany's DAX
FDXc1 and London's FTSE FFIc1 slipped 0.5% and 0.3%
respectively. E-minis for the S&P500 ESc1 declined 0.25%.
In a rare occurrence, every market across Asia was in the
red on Monday. MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS lost 1.4%. Japan's Nikkei .N225
faltered 1%.
Chinese shares were heavily sold off with the blue-chip
index .CSI300 down 2.2% and Hong Kong's Hang Seng index .HSI
down 1.8%.
South Korea's KOSPI .KS11 was off 2.1% and Australian
shares .AXJO slipped about 1.2% to a five-week low.
"We are lowering our exposure to global equities to the
range we consider 'underweight'," Morgan Stanley's London-based
strategist Andrew Sheets said in a note. The previous range was
'neutral'.
Expensive valuations and pressure on earnings were among the
reasons for the downgrade, Sheets said, while the bank increased
its exposure to emerging markets sovereign credit and safe haven
Japanese government bonds.
Since the start of the year, global equities have generally
been bolstered by expectations that central banks will keep
interest rates at or near record lows to boost economic growth.
Those expectations were tempered by a U.S. labour report on
Friday that showed nonfarm payrolls jumped 224,000 in June,
beating forecasts for 160,000, in a sign the world's largest
economy still had fire. Given the strength shown in that data, investors now expect
U.S. Federal Reserve Chairman Jerome Powell to go slow on rate
cuts this year.
Bets for aggressive Fed easings are already off, with the
market now pricing a 27 basis points easing this month, from 33
basis points prior to payrolls. 0#FF:
Powell will provide further cues on the near-term outlook
for monetary policy this week at his semi-annual testimony to
the U.S. Congress. "Global equities are undoubtedly expensive, but valuation
has been driven by lower yields and liquidity, and this just
makes this Thursday's speech from Fed chair Powell so
important," said Chris Weston, a strategist at Pepperstone.
"For those running dollar positions, gold or U.S.
equities...Powell's testimony is an event risk and one where we
should consider how any reactions would affect our exposures."
CURRENCIES AND GEOPOLITICS
There was some positive news on the protracted China-U.S.
trade war with White House Economic adviser Larry Kudlow
confirming that top representatives from the United States and
China will meet in the coming week for trade talks. "Whether the negotiators can find a solution to the
difficult structural issues that remain between the two sides is
another matter, and Kudlow cautioned there was 'no timeline' to
reach an agreement," National Australia Bank strategist Rodrigo
Catril said.
In currency markets, action was in the Turkish lira TRY=
which weakened to 5.7930 per dollar, the lowest since June 28
after Turkey's central bank governor Murat Cetinkaya, whose
four-year term was due to run until 2020, was replaced by his
deputy Murat Uysal.
President Tayyip Erdogan sacked Cetinkaya for refusing the
government's repeated demands for rate cuts, laying bare
differences between them over the timing of interest rate cuts
to revive the recession-hit economy.
The dollar index .DXY , which measures the greenback
against a basket of major currencies, was a shade weaker at
97.245 after climbing to a 2-1/2-week top of 97.443 on Friday.
The euro EUR=D3 was a tad lower at $1.1224, not far from a
2-1/2-week low of $1.1205 touched on Friday.
The Australian dollar AUD=D3 , which has been on an uptrend
since June 18, slipped below 70 U.S. cents to last trade at
$0.6985.
Geopolitics may be in focus this week following news on
Sunday that Iran will boost its uranium enrichment, in breach of
a cap set by a landmark 2015 nuclear deal. "So far U.S.-Iran tensions have not had a material impact on
markets, but if tensions escalate it could be a different
story," said NAB's Catril.
In commodity markets, oil prices rose with Brent crude
futures LCOc1 , the international benchmark for oil prices, up
5 cents at $64.28 per barrel while U.S. crude added 4 cents to
$57.55. O/R
Spot gold XAU= gained 0.3% to $1,403.21 an ounce.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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(Editing by Darren Schuettler and Jacqueline Wong)