GLOBAL MARKETS-Asian stocks fail to catch Wall St's Fed rally as trade angst persists

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Focus shifts back to G20 after Fed euphoria
* MSCI Asia-Pacific index inches up 0.1%
* Dollar struggles, government bonds buoyant post-Fed
* Middle East tensions support crude oil

By Shinichi Saoshiro
TOKYO, June 21 (Reuters) - Asian stocks struggled on Friday
to follow Wall Street's euphoria about a possible U.S. rate cut
next month as anxiety over Sino-U.S. trade negotiations clouded
investor sentiment in the region.
Also tempering appetite in Asia were fresh worries about the
Middle East, after Iran shot down a U.S. military drone, raising
fears of a military confrontation between Tehran and Washington
and pushing the crude oil price higher. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.1%. The index was up about 4% on the
week, during which it brushed its highest level since May 8.
The Shanghai Composite Index .SSEC rose 0.4%, Australian
stocks .AXJO declined 0.3% and Japan's Nikkei .N225 shed
0.2% amid the yen's big surge.
The S&P 500 .SPX hit a record high on Thursday after this
week's Federal Reserve meeting boosted expectations that the
central bank will cut interest rates as soon as next month to
keep the U.S.-China trade war from stalling economic growth. .N
The Fed signalled easing after the conclusion of its policy
setting meeting on Wednesday, saying it was ready to battle
growing global and domestic economic risks. "There is no doubt that this week's FOMC meeting outcome is
positive for the financial markets including those in Asia,"
said Kota Hirayama, senior emerging market economist at SMBC
Nikko Securities in Tokyo.
"That said, the FOMC alone won't be able to sustain Asian
equities indefinitely until some kind of solution can be worked
out for the U.S.-China trade war at the G20, since the region is
particularly vulnerable to the conflict."
Investors have pinned hopes on the United States and China
reaching some sort of compromise at the sidelines of the G20
summit in Japan on June 28-29.
In currency markets, the prospect of U.S. interest rates
being lowered put the dollar squarely on the defensive.
The dollar index .DXY against a basket of six major
currencies fell to a two-week low of 96.495. The index has shed
roughly 1% this week.
The greenback has fallen 1.3% versus the yen JPY= this
week and slid to a six-month low of 107.12 yen on Friday.
The euro EUR= was a touch higher at $1.1302 after popping
up to an eight-day high of $1.1317 in the previous session. The
single currency was headed for a weekly gain of 0.8%.
With the Fed expected to ease policy soon, and with other
central banks such as the European Central Bank and the Bank of
Japan seen following in their wake, government bonds were on a
bullish footing.
The benchmark 10-year U.S. Treasury yield US10YT=RR surged
in price and its yield fell below 2% for the first time in 2-1/2
years on Thursday. It last stood at 2.007%.
The German 10-year bund yield DEYT=RR touched a record low
of minus 0.329% this week while Japan's 10-year yield
JP10YTN=JBTC fell to a near three-year trough of minus 0.185%
overnight.
"In euroland and Japan, central banks are pedal-to-the-metal
to revive dead economies after a dozen years of subpar growth,"
wrote Carl Weinberg, chief international economist at High
Frequency Economics.
"In North America, the game has been to throttle
well-performing economies before they overheat with inflation
consequences."
In oil markets, crude rose to three-week highs after Iran
shot down a U.S. military drone, raising fears of about fresh
conflict in the Middle East and supply constraints. O/R
U.S. crude oil futures CLc1 were up 0.68% at $57.46 per
barrel after rallying more than 5% the previous day.
Spot gold XAU= advanced to a six-year high of $1,410.78 an
ounce as the prospect of lower U.S. interest rates helped boost
the non-yielding precious metal. Gold has soared nearly 5% this
week. GOL/

(Editing by Sam Holmes)