* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan rises, gains led by China
* China-U.S. tentative agree to trade truce - SCMP
* Market pares bets for half-point Fed rate cut in July
By Swati Pandey and Wayne Cole
SYDNEY, June 27 (Reuters) - Asian share markets turned
higher on Thursday following a media report the United States
and China have tentatively agreed to a truce in their trade war,
ahead of a closely-watched meeting between the two nations this
weekend.
The South China Morning Post (SCMP), citing sources, said in
Washington and Beijing were laying out an agreement that would
help avert the next round of tariffs on an additional $300
billion of Chinese imports. On Wednesday, U.S. President Donald Trump said a trade deal
with his Chinese counterpart Xi Jinping was possible this
weekend though he was prepared to impose tariffs on virtually
all remaining Chinese imports if talks fail. "But the truce cake seems to have been baked," the SCMP
cited one of its sources as saying.
Hopes the world's two biggest economies would finally reach
an agreement were enough to cheer investors, sending MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS up 0.6%.
China led the gains with its blue-chip index .CSI300 up
1.4%. South Korea's KOSPI index .KS11 was up 0.6% while Hong
Kong's Hang Seng .HSI and Japan's Nikkei .N225 jumped 0.8%.
Relations between Washington and Beijing have spiralled
downward since talks collapsed in May, when the United States
accused China of reneging on pledges to reform its economy.
The ongoing trade war has already rattled investors who have
ditched shares for the safety of bonds and gold this year. It
has also prompted the U.S. Federal Reserve to pause its rate
tightenings and, in fact, signal a cut as soon as next month.
Many traders said they expected the market to remain in a
narrow range until after the weekend meeting of G20 leaders in
Osaka, Japan where Trump is also holding bilateral talks with
other nations.
"The bottom line is the market has been hit by a barrage of
noise that gives us less clarity than before," said Chris
Weston, market strategist at Pepperstone.
"While the most likely situation is we simply hear a lot of
bravadoes that the two sides plan to work closely together and
agree to find a solution that is amicable, we still need to
consider if the event poses a gaping risk for markets," he
added.
"It certainly feels as though the probability is we will see
traders manage exposures, refraining from adding too much
additional risk just in case."
Wall Street had been circumspect, with the Dow .DJI ending
Wednesday down 0.04%, while the S&P 500 .SPX lost 0.12% and
the Nasdaq .IXIC rose 0.32%.
LESS THAN 50
Trump weighed into U.S. monetary policy on Wednesday,
accusing Federal Reserve Chairman Jerome Powell of doing a "bad
job" and "out to prove how tough he is" by not cutting interest
rates. Markets are convinced the Fed will indeed ease at its next
meeting in July, but had to scale back bets on a half-point cut
following cautious comments from various policy makers.
Futures FEDWATCH are 100% priced for a cut of 25 basis
points, and imply a 22% chance of 50 basis points.
The probability of a less aggressive Fed and expectations of
a Sino-China trade truce helped ease the selling pressure on the
U.S. dollar, which inched up to 96.276 .DXY on a basket of
currencies from a three-month trough of 95.843.
The dollar bounced modestly against the yen to 107.97 JPY=
and away from a low of 106.77. The euro likewise eased back to
$1.13615 EUR= from a top of $1.1412.
The dollar's gains took a little of the shine off gold,
which broke a six-session winning stretch and eased to $1,407.22
per ounce XAU= .
Oil prices ran into profit-taking in early Asia, having
gained overnight on a larger-than-expected drawdown in crude
stocks as exports hit a record high and surprise falls in
refined product stockpiles. O/R
Brent crude LCOc1 futures eased 20 cents to $66.29, while
U.S. crude CLc1 lost 22 cents to $59.16 a barrel.
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(Editing by Sam Holmes)