GLOBAL MARKETS-European shares fall as optimism from Asian session falters

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog on European and UK stock
markets:
LIVE/

By Elizabeth Howcroft
LONDON, June 30 (Reuters) - European shares edged down, oil
fell and the dollar erased some gains on Tuesday, with little of
the optimism of the Asian session extending into early London
trading, as markets took stock at the end of the first half of
2020.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was up about 0.1% at 0830 GMT, after
Asian shares rose on strong data from the U.S. housing market
and Chinese factories. World shares are down around 8% so far this year, having
slumped 35% between Feb. 20 and March 23 in the most destructive
sell-off since the Great Depression. But the world equity index
is up 17.5% this quarter - on track for its biggest quarterly
gain since the third quarter of 2009. Rising COVID-19 cases continue to show signs of a second
deadly wave of the pandemic, but markets still expect a global
economic recovery with lockdown measures easing.
Los Angeles has become a new epicentre in the pandemic as
coronavirus cases and hospitalisations surge there despite
California Governor Gavin Newsom's orders requiring bars to
close and residents to wear masks in nearly all public spaces.
"Asset markets are looking beyond COVID stats," said Neil
Jones, head of FX sales at Mizuho Bank. "There's some
expectation of containment and then, further down the line, an
expectation of some form of measure to combat the virus."
U.S. Federal Reserve Chair Jerome Powell said on Monday the
outlook for the world's biggest economy was "extraordinarily
uncertain" and would depend both on containing the coronavirus
and on government efforts to support the recovery. European shares edged down on Tuesday, with the Euro STOXX
600 down 0.2%, having been relatively rangebound for the past
two weeks .STOXX .
London's FTSE 100 was down 0.7% .FTSE . Britain's economy
shrank by the most since 1979 in early 2020 as households
slashed their spending, according to official data that included
the first few days of the coronavirus lockdown. Supported by end-of-quarter flows, the dollar rose overnight
but steadied in early London trading, erasing early gains. At
0830 GMT it was at 97.59 against a basket of currencies, up 0.2%
on the day =USD .
"I would expect overall dollar demand to continue as we go
into July," Mizuho's Neil Jones said.
"If there's a summer lull then we may see a dollar sell-off
into the elections but as we run up to the end of the year I
would expect to see a resurgence of dollar demand," he added.
The euro was down around 0.2% against the dollar, at $1.1221
EUR=EBS , while the riskier Australian and New Zealand dollars
also edged down AUD=D3 NZD=D3 .
Oil prices slipped as traders took profits after sharp
gains the previous session and Libya's state oil company flagged
progress in talks to resume exports, potentially boosting
supply. U.S. crude CLc1 fell 1.5% to $39.12 a barrel, while Brent
crude LCOc1 slipped 0.6% to $41.15 per barrel. O/R
China's parliament passed national security legislation for
Hong Kong in response to last year's pro-democracy protests. The
United States, Britain and other Western governments have said
the legislation erodes the autonomy the city was granted at its
1997 handover. Market reaction was limited. Demand for safe German debt was little changed, with the
10-year government Bund yield at -0.474% DE10YT=RR , but demand
for riskier Southern European debt declined somewhat IT10YT=RR
PT10YT=RR ES10YT=RR . Traders will be looking for pointers from euro zone flash
inflation numbers, due at 0900 GMT, and from speeches by the
ECB's Isabel Schnabel, as well as the Bank of England's Jon
Cunliffe and Andy Haldane.

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