* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan down 0.2%; Nikkei falls 0.7%
* U.S. President Trump says he had to 'take China on'
* Eyes on Fed minutes, Jackson Hole meeting
By Swati Pandey
SYDNEY, Aug 21 (Reuters) - Asian shares fell on Wednesday as
fresh worries about a global recession led investors to dump
risky assets, with U.S. President Donald Trump showing no signs
of backing down in his trade war with China.
Trump said on Tuesday he had to confront China over trade
even if it caused short-term harm to the U.S. economy because
Beijing had been cheating Washington for decades. His strongly worded remarks came hours before his government
announced approval of an $8 billion sale of Lockheed Martin
LMT.N F-16 fighter jets to Taiwan, a move sure to draw
Beijing's ire and further dim prospects for a quick trade deal.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS eased 0.2%, snapping three straight days of
gains.
Japan's Nikkei .N225 slipped 0.6%, Australian shares
.AXJO were 0.8% lower and South Korea's KOSPI index .KS11
was a shade weaker.
On Wall Street, the Dow .DJI and the Nasdaq .IXIC fell
0.7% each while the S&P 500 .SPX lost 0.8%. Some analysts expect a further correction in world shares,
which are still above their December lows.
Aside from the trade war, political turmoil in Hong Kong,
Britain and Italy have also heightened uncertainties for
investors. The prospect of new elections in Italy after the
resignation of Prime Minister Giuseppe Conte added to jitters,
sending Italian sovereign bond yields sliding.
The key for markets now is whether pledges for more
accommodative policy from Germany to China are enough to assuage
concerns about the state of the global economy and end fears of
recession.
The immediate focus shifts to the minutes of the Fed's most
recent meeting, due on Wednesday. Traders are also awaiting the
central bank's Jackson Hole seminar later this week and a Group
of Seven summit this weekend for clues on what additional steps
policymakers will take to boost economic growth.
Morgan Stanley economist Ellen Zentner advised clients to
watch for the use of the word "somewhat" when Fed Chair Powell
describes further policy adjustments.
"Acknowledgment that downside risks have increased with no
characterisation of 'somewhat' could be taken as confirmation
that it is likely the Fed makes a larger cut in September,"
Zentner wrote in a note.
Investors are pricing in a 16% chance of a 50 basis point
cut to U.S. Fed funds rate in September.
MORE STIMULUS
Alarm bells started ringing last week when U.S. 2-year
yields traded above those of their 10-year counterparts for the
first time since 2007, an inversion that has presaged previous
recessions and is widely watched by markets.
Most fund managers and economists expect global policy
stimulus to prevent the world from tipping into recession.
Supporting that belief, Reuters reported earlier Trump and his
advisers are examining ways to provide a boost to the U.S.
economy should it be deemed necessary. In addition, the central banks of the euro zone, Australia
and China are all expected step open the monetary spigot further
this year while Germany is considering fiscal stimulus.
Those prospects have driven yields lower. Benchmark U.S.
10-year Treasuries US10YT=RR rose on Tuesday to yield 1.540%
from a high of 1.625% on Monday.
However, currency markets were mostly subdued ahead of the
Jackson Hole meeting and Fed minutes. The Japanese yen was
little changed at 106.24 per dollar after firming 0.4% versus
the greenback on Tuesday, while sterling GBP=D3 was last
trading at $1.2162.
The euro EUR= trod water near Tuesday's high of $1.1101.
The dollar index .DXY was on the defensive as it drifted
away from a three-week top touched earlier on Monday. It was
last flat at 98.208.
In commodities markets, U.S. crude CLc1 dipped 2 cents to
$56.11 per barrel while Brent LCOc1 added 5 cents to $60.08.
Spot gold XAU= was a shade weaker at $1,506.14 an ounce.
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(Editing by Sam Holmes)