GLOBAL MARKETS-Stocks, yuan fall as Sino-US trade talks deadlocked; investors await China retaliation

* Trump-Xi talks likely at G20 summit in June: White House
advisor
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Major currencies calm for the moment; Bitcoin at 9-month
highs

By Tomo Uetake and Wayne Cole
SYDNEY, May 13 (Reuters) - U.S. stock futures and Asian
shares fell on Monday on growing anxiety over whether the United
States and China will be able to salvage a trade deal, after
Washington sharply hiked tariffs and Beijing vowed to retaliate.
The United States and China appeared at a deadlock over
trade negotiations on Sunday as Washington demanded promises of
concrete changes to Chinese law and Beijing said it would not
swallow any "bitter fruit" that harmed its
interests. Investors are bracing for threatened "countermeasures" from
China in retaliation for Washington's tariff increase on Friday
on $200 billion worth of Chinese goods. The move followed
accusations by U.S. President Donald Trump that Beijing "broke
the deal" by reneging on earlier commitments.
E-Mini futures for the S&P 500 ESc1 shed 1.0%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS dropped 0.5%, nearing its two-month low marked
on Thursday.
Chinese shares tumbled, with the benchmark Shanghai
Composite .SSEC and the blue-chip CSI 300 .CSI300 shedding
as much as 1.6% and 1.9%, respectively, before paring some of
the losses. Hong Kong's financial markets were closed for a
holiday. Japan's Nikkei average .N225 sunk as much as 1.0% to hit
its lowest level since March 28. It last traded down 0.5%.
U.S. benchmark 10-year Treasury note yield US10YT=RR
inched down to 2.437%, partly as a safe haven but also on
speculation that the escalating trade war would put more
pressure on global growth and thus keep major central banks
accommodative.
White House economic adviser Larry Kudlow told a Fox News
program that China needs to agree to "very strong" enforcement
provisions for an eventual deal and said the sticking point was
Beijing's reluctance to put into law changes that had been
agreed upon.
Kudlow said the U.S. tariffs would remain in place while
negotiations continue and there is a "strong possibility" that
Trump will meet Chinese President Xi Jinping at a G20 summit in
Japan in late June. "Our base case remains that a trade deal between the United
States and China is likely. But news flow today suggests this
could take more time and is unlikely to be concluded until late
June," said John Woods, Hong Kong-based chief investment officer
of APAC at Credit Suisse AG.
Others were more pessimistic.
"Our base case is for limited progress and Chinese
retaliation. We see a significant risk for all Chinese imports
to be subject to tariffs over the next month or so," said
Michael Hanson, head of global macro strategy at TD Securities.
"The market reaction will ultimately depend on whether China
and the U.S. continue to negotiate, whether the remaining $325
billion of U.S. imports from China also get tariffed, how China
retaliates, and what happens to the (section) 232 auto tariffs."
Under that scenario, the renminbi CNY=CFXS was likely to
fall between 5%-6% against the U.S. dollar in the coming three
months, said Hanson, as a shock absorber to the economic impact
of heavier tariffs.
The offshore Chinese yuan fell to its lowest levels in more
than four months at 6.88 to the dollar CNH= . It last stood
down 0.5% at 6.852 per dollar.
The other major currencies were relatively calm, with the
safe-haven yen still supported but not aggressively so. The
dollar was holding at 109.75 yen JPY= , down 0.2% on the day
and just above a 14-week trough of 109.46.
The euro was steady at $1.1233 EUR= , while the dollar was
little changed against a basket of currencies at 97.302 .DXY .
"If there is a lack of progress (in the U.S.-China talks)
over the coming weeks, Asian currencies will come under further
pressure," noted Khoon Goh, head of Asia research at ANZ
Research, while adding that his team does not expect the yuan
will break the psychological 7 per dollar level.
"While we hope for the best, our baseline case is now for
the United States and China to fail to reach a deal, meaning
tariffs will get raised on the remainder of Chinese exports to
the United States."
In commodity markets, oil prices remained a relatively tight
range, with the U.S. crude futures CLc1 were last down 0.1% at
$61.62 a barrel, while Brent crude LCOc1 futures gained 0.3
percent at $70.81. O/R
Spot gold eased 0.1% to $1,283.61 per ounce XAU= .
On the other hand, digital currencies maintained most of
their big gains made over the weekend.
Bitcoin BTC=BTSP jumped more than 10 percent on Saturday
and marked its nine-month high of $7,585.00 on Sunday before
paring the gains. It last quoted at $7069.76, up 1.4% on the
day.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>