REFILE-GLOBAL MARKETS-Hong Kong leads Asian stocks lower, oil fragile at 5-month lows

(Corrects to fix RIC for Hang Seng Index)
* HK shares down sharply for second day after big street
protests
* Soft oil prices bolster expectations of Fed rate cuts
* Bond yields plunge; Japan at 3-year low, Australia at
record
* European shares seen 0.2% lower
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano
TOKYO, June 13 (Reuters) - Asian shares slumped on Thursday
as the Hong Kong market was hit for the second straight session
following a day of massive street protests, while oil prices
flirted with five-month lows due to higher U.S. crude
inventories and a bleak demand outlook.
Fading hopes that the United States and China will clinch a
deal on the sidelines of a Group of 20 summit meeting in Osaka
on June 28-29 also hurt sentiment and drove bond yields down.
"There's not even a plan of ministerial-level bilateral
meetings ahead of the G20 summit. You can't expect any major
agreement," said Hirokazu Kabeya, chief global strategist at
Daiwa Securities.
European stock are expected to fall, with futures Britain's
FTSE FFIc1 .FTSE and Germany's DAX FDXc1 .GDAXI down
about 0.2%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell as much as 1% and was last off 0.6%.
Hong Kong's Hang Seng Index .HSI tumbled 1.8% at one point
following Wednesday's 1.7% fall.
The selling pressure in Hong Kong came after legislation
that would allow citizens to be extradited to China triggered a
mass protest and some of the worst unrest seen in the territory
since Britain handed it back to Chinese rule in 1997.
Japan's Nikkei .N225 lost 0.8% while U.S. stock futures
ESc1 slipped 0.2% in Asia, following small losses the previous
day when the S&P 500 .SPX shed 0.20%.
Oil hovered near five-month lows, pressured by another
unexpected rise in U.S. crude stockpiles, as well as the bleaker
outlook for demand posed by prospects of a protracted trade war
between China and the United States.
Brent crude futures LCOc1 barely moved at $60.06 after a
3.7% slide on Wednesday to $59.97 a barrel, the international
benchmark's lowest close since Jan. 28.
U.S. West Texas Intermediate crude futures CLc1 stood at
$51.12 per barrel, compared to the previous day's close of
$50.72 a barrel, its weakest settlement since Jan. 14.
"It is a bit of mystery that oil prices are so low when
global stock prices remain relatively supported. But one thing
is certain. Weaker oil prices will curb inflation and boost rate
cut expectations," said Daiwa's Kabeya.
Government data showed on Wednesday U.S. consumer prices
barely rose in May, with the core annual inflation
USCPFY=ECI slowing to 2.0%, compared to a peak of 2.4% last
July, adding to the growing expectations of a Federal Reserve
rate cut in coming months. Investors will be looking to what Fed policymakers will say
after its next policy meeting on June 18-19, with Fed Funds rate
futures 0#FF: pricing in a 25-basis-point rate cut for the
subsequent policy review on July 30-31.
That is completely at odds with the Fed's projection three
months ago, when policy makers saw gradual rate hikes in coming
years.
"The U.S. real economy has not worsened that much. But given
market expectations, the Fed will have no choice but to cut
rates... It will take an action as an insurance against
potential downside risks to the economy as a Sino-U.S. trade
deal looks unlikely for now," said Kozo Koide, chief economist
at Asset Management One.
The 10-year U.S. Treasuries yield dipped to 2.103 percent
US10YT=RR , near Friday's 2.053 percent, its lowest level since
September 2017.
Bond yields also fell in Asia. Long-dated Japanese
government bond yields hit their lowest levels since August
2016, with 20-year yield JP20YTN=JBTC down 2.5 basis points at
0.220 percent, before they rose back on a weak 30-year bond
auction.
In Australia, long known for its high-yield currency, rates
fell to record lows, with three-year yield now slipping below 1
percent AU3YT=RR after the country's jobs data pointed to
another interest rate cut in July to follow one just last week.
In the currency market, the yen gained 0.2% to 108.32 to the
dollar JPY= as risk sentiment soured while the Australian
dollar dropped 0.25% to $0.6910 AUD=D4 .
The euro stood little changed at $1.1293 EUR= , having
taken a hit on Wednesday after U.S. President Donald Trump said
he was considering sanctions over Russia's Nord Stream 2 natural
gas pipeline project and warned Germany against being dependent
on Russia for energy. The British pound is on the back foot after British
lawmakers defeated an attempt led by the opposition Labour Party
to try to block a no-deal Brexit by seizing control of the
parliamentary agenda from the government. Sterling fetched $1.2688 GBP=D4 , not far from this week's
low of $1.2653.

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(Editing by Shri Navaratnam)