GLOBAL MARKETS-Trade tensions weigh on stocks as markets await Fed verdict

* Sino-U.S. trade talks conclude in Shanghai with no deal
* China June factory activity shrinks for third straight
month
* Fed expected to cut rates by 25 basis points, more seen
* Pound hovers near 28-month low over fear of no-deal Brexit
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Karin Strohecker
LONDON, July 31 (Reuters) - Fresh trade war fears weighed on
global stocks on Wednesday ahead of a U.S. Federal Reserve
meeting with the dollar holding firm and Britain's pound subdued
amid rising fears of no-deal Brexit.
Combative warnings from U.S. President Donald Trump cast a
shadow over Sino-U.S. trade talks which concluded in Shanghai on
Wednesday. Beijing attributed the lack of progress to
Washington's flip-flopping. The fresh trade tensions come ahead a U.S. Federal Reserve
meeting which is expected to see interest rates reduced by 25
basis points (bps) in its first rate cut in more than a decade.
Yet the focus is on whether it will leave the door open for
further easing to shore up the world's largest economy in the
face of slowing global growth and the fallout from trade
conflicts.
MSCI's broadest global stock index .MIWD00000PUS and
Europe's pan regional STOXX 600 .STOXX slipped 0.1%, the
latter flirting with a fresh one-month low as worries over trade
wars and Brexit offset encouraging signals from the earnings
season. London's FTSE .FTSE fell 0.3% while Frankfurt stocks
.GDAXI gained 0.2% and Paris .FCHI was treading water.
In focus were banks, with strong results from French lender
BNP Paribas BNPP.PA and Switzerland's Credit Suisse CSGN.S
countering a poor report from British bank Lloyds LLOY.L .
"Trade talks have finished without an agreement," said Justin
Onuekwusi, fund manager at Legal & General Investment
Management.
"Of course, it doesn't help that almost as a prelude to the
conversation you get tweets that are quite antagonistic," he
said, referring to a tweet by Trump warning China against
waiting out his current presidential term before finalising a
trade deal. In Asia, shares ex-Japan .MIAPJ0000PUS fell to a six-week
low with China mainland stocks down nearly 1% and Hong Kong
tumbling 1.3%. Japan's Nikkei .N225 declined by 0.7%.
China data showing factory activity shrank for the third
month in a row in July added to the sombre mood. But U.S. futures pointed to main indexes ESc1 NQc1
opening higher. On Tuesday, major Wall Street stock averages
ended slightly lower with the S&P 500 .SPX losing 0.26%.
After the closing bell in the United States, Apple shares
AAPL.O rose 4.2% as its April-June earnings beat estimates and
CEO Tim Cook cited "marked improvement in Greater China".
Expectations for Fed easing helped lift the S&P 500 index
2.4% so far this month. Fed funds rate futures 0#FF: are now
fully pricing in a 25 basis point rate cut on Wednesday and
another 25 basis point reduction by September.
"Exactly what happens today is far from a foregone
conclusion," said Deutsche Bank's Jim Reid in a note to clients.
"Although the Fed have given no real encouragement to the
notion of a 50 basis point (bps) cut it's worth noting that the
last time the Fed began a series of rate cuts, in September
2007, their opening move was a 50 bps cut, and a similar 50 bps
cut happened when the Fed began cutting in January 2001."
Trump on Tuesday reiterated his call for the Fed to make a
large interest rate cut, saying he was disappointed in the U.S.
central bank and that it had put him at a disadvantage by not
acting sooner. In currency markets, the dollar index .DXY traded flat
around 98.064 after pulling back from a two-month high of 98.206
touched on Tuesday.
The greenback was also steady against the yen JPY= and the
euro EUR= , with the former undermined on Tuesday by the BOJ's
decision to refrain from expanding stimulus though it committed
to doing so "without hesitation" if required. Meanwhile the British pound hovered near a 28-month low hit
the previous day on growing concerns about a disorderly Brexit.
Sterling traded at $1.2160 GBP=D4 , not far from $1.2120
marked on Tuesday. It has fallen 4.2% so far this month, on
course to log its worst monthly performance since October 2016.
In commodity markets, crude oil futures rose for the 5th
straight day, buoyed by a bigger-than-expected drop in U.S.
inventories. O/R U.S. West Texas Intermediate (WTI) crude
CLc1 gained 28 cents to $58.34 per barrel while Brent crude
futures LCOc1 added 48 cents to $65.2.
Three-month copper on the London Metal Exchange (LME)
CMCU3 was almost unchanged at $5,950 a tonne. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Trade tension hits stocks Trade tension hits stocks https://tmsnrt.rs/2JNPb3M
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