* MSCI world equity index down 0.1%
* July Fed minutes show divisions on rate cuts
* Yuan falls to lowest since March 2008
* German private sector struggles in August
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Updates prices throughout; adds investors comment)
By Tom Wilson
LONDON, Aug 22 (Reuters) - Share markets slipped on Thursday
as uncertainty over the outlook for U.S. interest rate cuts left
investors on edge, with the release of minutes from the Federal
Reserve's last policy meeting exposing rifts over its recent
easing.
The Chinese yuan's slump to an 11-year low CNY=CFXS also
sapped their appetite for risk, with dealers saying state-owned
banks were seen selling dollars to support the yuan.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 47 countries, edged down 0.1%. In Europe, the Euro
STOXX 600 .STOXX fell 0.2% in choppy trade, following a 0.6%
drop in MSCI's broadest index of Asia-Pacific shares outside
Japan .MIAPJ0000PUS .
Wall Street futures gauges NQcv1 ESc1 were down between
0.2% and 0.3%.
Minutes of the Fed's July meeting showed deep splits among
policymakers over whether to cut interest rates last month,
though there was some unity in wanting to signal it was not on a
preset path to looser policy. The Fed cut rates by 0.25% in July. While a "couple" of Fed
members supported a deeper cut of half a percentage point, the
minutes showed, a larger number favoured no change at all.
That reluctance to loosen policy seems at odds with the
expectations for a cut of over 100 basis points by the end of
2020 that are already priced into markets.
Market players said that the minutes reflected a dissonance
between the predictions of easing - fuelled by geopolitical
concerns such as U.S.-China trade tensions and economic weakness
in major economies such as Germany - and the apparently solid
fundamentals of the U.S. economy.
"The update last night was a bit of a reality check - maybe
don't get ahead of yourself on what the Fed is going to do,"
said David Madden, market analyst at CMC Markets.
"If you forget about the geopolitical headlines, forget
about what the bond markets are doing, and look at the
underlying indicators of the U.S. ... people are in jobs,
earning decent money, and more importantly spending money."
Indeed, the apparent strength of the world's biggest economy
was on display on Wednesday, where Wall Street basked in
surprisingly upbeat results from retailers that sent Target (NYSE:TGT)
TGT.N surging 20% and Lowe's Cos LOW.N up 10%.
But beyond the United States, worries about the fragility of
the global economy were evident in data from Europe on Thursday.
Germany's private sector continued to struggle in August,
suggesting further that Europe's largest economy is heading for
a recession after its economy shrunk between April-June.
Euro zone business growth expectations also fell to their
weakest in more than six years on trade war fears, even as the
expansion picked up a touch in August. YUAN AT LOWEST SINCE 2008
The Fed minutes raised the stakes for Chairman Jerome
Powell's remarks on Friday at the Fed's annual policy retreat in
Jackson Hole, Wyoming - an event investors are waiting for with
bated breath.
"Jackson Hole is big," said Markus Schomer, chief economist
at PineBridge Investments. "The Powell speech will be hugely
important - there is a lot of pressure on him to deliver
something for everyone."
U.S. President Donald Trump has been urging larger rate
reductions, with proponents of looser policy pointing to the
need to lift inflation toward the Fed's target and thwart
fallout from global trade tensions.
And those trade worries played out again in currency
markets, where the fall in China's yuan to 7.0752 per dollar,
its lowest since March 2008, promoted a rush to perceived
safe-haven assets such as the Japanese yen.
Against the dollar JPY= , the yen advanced by 0.2% to
106.44 yen, nearing last week's eight-month low of 105.05 yen.
Currency traders said that while the Chinese economy's
slowing growth meant pressure had been building on the renminbi
from long before, the new fall suggested Beijing was prepared to
use the currency as leverage as trade tensions simmer.
"This indicates that this is an instrument of the Chinese
government in the trade war. It is allowing for renminbi
weaknesses," said Thu Lan Nguyen, FX strategist with Commerzbank (DE:CBKG)
in Frankfurt.
"It is an indication that they are expecting the trade war
to continue, to last longer than they anticipated last year."
In commodities, oil prices dipped on worries about the
global economy and bigger-than-expected buildups in oil product
inventories in the United States, the world's biggest oil
consumer.
Brent crude LCOc1 futures rose 0.6%, or 37 cents, to
$60.67, while U.S. crude CLc1 also gained 0.6% - 35 cents - to
$56.03 a barrel.
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markets, please click on: LIVE/
Composite Euro area PMIs rise https://tmsnrt.rs/2Z9i5mz
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