GLOBAL MARKETS-Asia shares take a breather, hope for flexible Fed

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Sino-U.S. tensions send a chill across Asia shares
* Markets wager Fed to be more flexible on inflation
* Oil underpinned as hurricane closes U.S. refineries

By Wayne Cole
SYDNEY, Aug 27 (Reuters) - Asian shares touched two-year
peaks on Thursday in the wake of Wall Street's record run as
cheap cash drove up big-cap tech darlings, although Sino-U.S.
tensions caused caution to creep in as the session progressed.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS turned flat after earlier reaching its highest
since August 2018.
Japan's Nikkei .N225 eased 0.4% from levels not seen since
mid-February, and South Korea .KS11 fell 0.8% as a jump in
coronavirus cases ended four days of rises. Even S&P 500 futures ESc1 dipped 0.2%, although that
followed five straight sessions of gains.
Asian investors turned more circumspect because of the
military face-off in the South China Sea, as Washington
blacklisted 24 Chinese companies while Beijing reportedly test
fired missiles into the area on Wednesday. Yet markets globally are still focused on the endless
liquidity being pumped out by central banks.
Federal Reserve Chair Jerome Powell is expected to outline a
more flexible approach to policy on Thursday including a shift
to targeting an average inflation rate around 2% that will allow
rates to stay super-low for longer.
"So with U.S.-China tensions seemingly not a major concern,
the deluge of fiscal and monetary support remains the overriding
tail wind for risk assets with large cap the beneficiaries,"
said Rodrigo Catril, a senior FX strategist at NAB.
The Dow .DJI ended Wednesday up 0.3%, while the S&P 500
.SPX climbed 1.02% and the Nasdaq .IXIC 1.73%. Gains were
again concentrated in the tech majors with Netflix Inc NFLX.O
surging 11.6% and Facebook Inc FB.O 8.2%.
The liquid largesse from central banks has kept sovereign
bonds well supported even as stocks reach new highs. Yields on
10-year Treasuries US10YT=RR have steadied at 0.68%, after
finding solid bids around 0.73%.
At the same time, the prospect of even more easing from the
Fed has kept the dollar on the defensive. Against a basket of
currencies, it was stuck at 92.921 =USD on Thursday and
uncomfortably close to the recent two-year trough of 92.124.
The euro held at $1.1832 EUR= and near its recent top of
$1.1965, while the dollar backed off to 106.02 yen JPY= from a
high of 106.57 earlier in the week.
The dollar has also been steadily trending lower on the
Chinese yuan to reach depths not seen since mid-January at 6.885
yuan CNY= . CNY/
In commodity markets, gold eased back to $1,943 an ounce
XAU= and remains short of its August peak of $2,072. GOL/
Oil prices were underpinned as U.S. producers shut output in
the Gulf of Mexico ahead of Hurricane Laura. O/R
Brent crude LCOc1 futures edged up 5 cents to $45.69 a
barrel, while U.S. crude CLc1 dipped 5 cents to $43.34.

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(Editing by Richard Pullin)