GLOBAL MARKETS-Shares tumble, dollar firms as Fed scotches big rate-cut bets

(Updates prices throughout, adds analyst comment in par 8)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan down 0.4%, Nikkei gives up early losses
* Dollar enjoys broad-based rally against major currencies
* Fed cuts rates by 25 basis points, further cuts not
certain
* U.S.-China trade talks end with no progress

By Swati Pandey
SYDNEY, Aug 1 (Reuters) - Asian shares slipped to six-week
lows on Thursday while the dollar jumped to two-year highs as
the U.S. Federal Reserve rattled markets by signalling that its
first rate cut in more than a decade was not the start of a
lengthy easing cycle.
Investors were pricing in more than 100 basis points of
easing from the Fed over the next year, sending world equities
soaring to record highs in recent days. But Fed Chair Jerome
Powell dented those bets, sounding far more circumspect about
the need for further policy easing.
In early European deals, the pan-region Euro Stoxx 50
futures STXEc1 fell 0.5% while futures for Germany's DAX
FDXc1 and London's FTSE FFIc1 were down 0.3% each and those
of France's CAC 40 FCEc1 eased 0.2%.
E-minis ESc1 for the S&P500 ESc1 were 0.15% lower.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS faltered 0.8%, extending losses for a fifth day
to the lowest since mid-June and on track for the biggest
one-day percentage drop in a month.
Japan's Nikkei .N225 reversed early declines and were a
shade higher, while Australian shares .AXJO declined 0.4%.
Losses in Chinese shares accelerated after they opened lower
with the blue-chip index .CSI300 down 0.8%.
World shares recoiled overnight following remarks from
Powell that Wednesday's 25-basis-point easing was "not the
beginning of a long series of rate cuts".
Powell characterised the rate cut as "a mid-cycle adjustment
to policy", citing signs of a global slowdown, simmering U.S.
trade tensions and a desire to boost too-low inflation. Markets
took that as a sign that the Fed will be cautious in making
further cuts. Riskier assets such as shares have had a golden run in the
past decade as global central banks have kept monetary policies
stimulatory, world growth has been strong and corporate profits
have surged. But since the middle of last year trade disputes
have become a major worry for policymakers as factory activity
stuttered, while business investment and profits faltered in a
blow to the global economy.
"We believe the Fed is trying to thread the needle,
balancing market jitters about slowing global growth with robust
consumer spending and a strong job market in the U.S.," said
Nick Maroutsos, co-head of global bonds at Janus Henderson.
"In other words, by cutting just 25 bps, the Fed is trying
to bolster market confidence while also keeping some dry powder
in reserve in case of an economic shock."
Adding to worries, the United States and China on Wednesday
ended a brief round of trade talks without much progress in
ending their year-long tariff war. Downbeat data and factory surveys on Thursday pointed to
further weakness for Asia's trade-reliant economies.
South Korea's exports tumbled for an eighth straight month
in July amid persistently weak global demand and an escalating
dispute with Japan, while its new export orders shrank the most
in about six years. South Korea, the world's sixth-largest exporter, is the
first major industrial economy to release trade data each month,
providing an early assessment on the health of global demand.
Pressure on Chinese factories eased slightly, but
manufacturing activity continued to shrink. "The broader global trade dynamic remains a challenge,"
Morgan Stanley strategist Michael Zezas said. "Trade should
continue to drag on corporate confidence, capex and global
growth in the near term."

BONDS AND GOLD
U.S. Treasuries US2YT=RR were sold off as investors scaled
back expectations for at least 100 basis points of easing in the
near term. Yields on 10-year notes US10YT=TWEB climbed as high
as 2.053% in early Asian hours from a U.S. close of 2.007%.
In foreign exchange markets, the dollar enjoyed a
broad-based rally against major currencies, including the euro
and Antipodean currencies on expectations monetary policies in
Europe, Australia and New Zealand will remain accommodative.
The dollar index .DXY against a basket of six major
currencies finished July 2.5% higher and was last up 0.4% at
98.899. Against the Japanese yen JPY= , the dollar broke above
109 to jump to the highest since end-May.
The common currency EUR= fell to $1.1032, the lowest since
May 2017. It was last at $1.1047.
The Aussie AUD=D3 slipped below key chart support of
$0.6832 to as low as $0.6828, a level not seen since early
January when a currency "flash crash" briefly took it to
$0.6715.
The kiwi NZD=D3 hit a six-week trough of $0.6535 as
markets wager on a rate cut by the Reserve Bank of New Zealand
next week.
U.S. crude futures CLc1 fell 76 cents to $57.82 per barrel
in the wake of Powell's comments on the rate outlook. Brent was
down 71 cents at $64.34. O/R
Spot gold XAU= made a new two-week trough on Thursday
after falling to 1,405.26.

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(Editing by Kim Coghill & Shri Navaratnam)