GLOBAL MARKETS-Asia shares slip, long for clarity on Fed policy

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asia subdued, strong retail earnings lift Wall St
* Fed minutes show division on rate cuts
* Trump says no longer looking at tax cuts
* PMI surveys, ECB minutes due Thursday

By Wayne Cole and Swati Pandey
SYDNEY, Aug 22 (Reuters) - Asian shares drifted off on
Thursday as uncertainty over the outlook for both U.S. interest
rates and the chance of global fiscal stimulus sucked the life
out of markets.
Not helping was a fresh slide in the Chinese yuan to an
11-year low CNY=CFXS , which dealers said prompted defensive
buying from state-owned banks. In early European trades, the pan-region Euro Stoxx 50
futures STXEc1 slipped 0.2% as did London's FTSE futures
FFIc1 . Germany's DAX futures FDXc1 eased 0.3% while France's
CAC 40 futures FCEc1 were off about 0.4%.
The S&P 500 e-minis ESc1 were down 0.16%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 0.5% in light volumes.
Japan's Nikkei .N225 ended a touch higher while Shanghai
blue chips .CSI300 climbed 0.3%. Hong Kong's Hang Seng index
.HSI was among the biggest losers, down more than 1% as unrest
in the Chinese-ruled territory disrupt business and investment.
Investor focus is next on a range of manufacturing surveys
from across the globe later in the day and risks are they will
show a further slowdown in activity, especially in Europe.
"These will be the first major economic releases for August
and will be closely watched, especially given the focus on
growth and the global collapse in yields," analysts at JPMorgan
said in a note.
Japan's flash PMI showed factories and exports remained
subdued in July, though service activity expanded at the fastest
pace in almost two years. Overnight, minutes of the Federal Reserve's July meeting
showed policymakers were deeply divided over whether to cut
interest rates, but united in wanting to signal they were not on
a preset path to more easing. Indeed, while a "couple" of Fed members favoured a deeper
cut of half a point, "several" favoured no change at all.
That reluctance did not seem to gel with the market's
aggressive pricing for more than 100 basis points of easing by
the end of 2020. FEDWATCH
Treasuries were sold in response and two-year yields
US2YT=RR were left at 1.558%, compared with last week's low of
1.467%. US/
"The key message from the Fed minutes is that the 25
basis-point cut in July was just a calibration, a mid cycle
adjustment and not the start of a new easing cycle," said
Rodrigo Catril, a senior FX strategist at National Australia
Bank.
Hopes for U.S. fiscal stimulus also got a knock when
President Donald Trump reversed course and said he was not
looking at cutting payroll taxes. POWELL
Much now depends on how dovish Fed Chair Jerome Powell
chooses to be in his Jackson Hole speech on Friday.
"The most sensitive comments will revolve around whether
Powell is willing to reaffirm a view that the easing cycle is a
'mid-cycle adjustment' or align more closely to market
thinking," said Alan Ruskin, macro strategist at Deutsche Bank.
"If he sticks to the old language as is most likely, it
would affirm that he is still confident that the strength of
consumption, in combination with modest Fed easing, will be
sufficient to keep the recovery broadly on track."
That would be more hawkish than expected and would likely
lift the dollar further, he said.
The dollar had already bounced overnight, and was last at
98.311 against a basket of currencies .DXY from a low of
97.948. It also reached 106.60 yen JPY= from Wednesday's
trough of 106.21.
The euro edged back to $1.1091 EUR= from a top of $1.1107,
not helped by a gloomy economic outlook from Germany's finance
ministry. The European Central Bank will release minutes of its last
policy meeting on Thursday and markets are looking for more
detail on exactly when and how aggressively it might ease
policy.
In commodity markets, spot gold drifted off to $1,498.6
XAU= from a recent high of $1,534.3.
Brent crude LCOc1 futures eased 12 cents to $60.18, while
U.S. crude CLc1 fell 3 cents to $55.65 a barrel.

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(Editing by Richard Borsuk & Shri Navaratnam)