* Asian stocks flat as short-covering has run its course
* Bond yields under pressure globally
* UK bond yields, pound under pressure on BoE remarks
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Hideyuki Sano
TOKYO, July 3 (Reuters) - Asian shares were subdued on
Wednesday as initial enthusiasm over the latest U.S.-China trade
truce was overtaken by fresh concerns over Washington's threat
of tariffs on additional European goods.
Global growth concerns also weighed on investor confidence,
with South Korea the latest trade-reliant economy to cut its
economic growth and export targets, a day after weaker factory
readings worldwide. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was almost flat, while Japan's Nikkei .N225
was down 0.4% in early trade.
U.S. stocks managed modest gains on Tuesday after holding
near the unchanged mark for much of the session, with the S&P
500 .SPX gaining 0.29% to a record close of 2,972.98, with
dividend-oriented utilities and real estate stocks leading the
gains. .N
Still, a rally in global stocks following the U.S.-China
summit at weekend is rapidly losing steam. While the threat of
new U.S. tariffs has been postponed for now, existing tariffs
that have disrupted global supply chains are unlikely to be
lifted any time soon.
The United States and China agreed on Saturday to restart
trade talks after President Donald Trump offered concessions
including no new tariffs and an easing of restrictions on tech
company Huawei in order to reduce tensions with Beijing.
"The easing of Huawei ban was a bit of surprise so there was
a bit of short-covering. But there remain question over how
effective the agreement will be," said Norihiro Fujito, chief
investment strategist at Mitsubishi UFJ Morgan Stanley
Securities.
Data published so far this week has showed factory activity
in the euro zone shrank at a faster pace than expected last
month and U.S. manufacturing activity slowed in June. Most Asian
factory gauges also contracted.
In addition, the U.S. Trade Representative's office released
a list of additional European products that could be subject to
tariffs, on top of products worth $21 billion that were
announced in April. These included olives, Italian cheese and
Scotch whisky. Global bond yields are also hitting new lows as investors
bet on further monetary easing around the world amid faltering
global growth.
Bank of England Governor Mark Carney on Tuesday flagged
uncertainties stemming from trade disputes and Britain's
departure from the European Union even as he stuck to his line
that the central bank could raise rates in event of a smooth
Brexit. The UK gilts yield tumbled 9 basis points to 0.722
GB10YT=RR , the first time in a decade the 10-year yield is
below the BOE's main policy rate.
European bond yields are expected to fall further after
European Union leaders agreed late on Tuesday to name France's
Christine Lagarde as the new head of the European Central Bank.
"Lagarde has been consistently saying that the global
economy is slowing down due to Sino-U.S. trade spats and that
countries need to deal with that by both fiscal and monetary
stimulus," said Mitsubishi's Fujito.
"This means she will continue (current ECB President Mario)
Draghi's dovish stance," he added.
In the United States, Trump said on Tuesday he intends to
nominate Judy Shelton, an economic adviser to his 2016
presidential campaign, and Christopher Waller, an executive vice
president at the Federal Reserve Bank of St. Louis, to the
Federal Reserve board of governors. The 10-year yield fell below two percent to fall as low as
1.969% US10YT=RR , a low last seen in November 2016.
In the currency market the pound flirted with two-week lows
after Carney's comments and last stood at $1.2599 GBP=D4 .
The euro was steadier at $1.1291 EUR= while the dollar
traded at 107.87 yen JPY= , off Monday's high of 108.535 hit
after China and the United States agreed to resume trade talks.
Oil prices rose a tad after data showed U.S. crude
inventories fell more than expected last week but remained
wobbly after four-percent dives on Tuesday even after OPEC and
allies including Russia agreed to extend supply cuts until next
March. O/R
Brent crude LCOc1 futures traded at $62.85 per barrel, up
0.7% after having fallen 4.1% on Tuesday.
U.S. West Texas Intermediate (WTI) crude CLc1 futures rose
0.6% to %56.56 a barrel, following 4.8% drop the previous day.
(Editing by Kim Coghill)