GLOBAL MARKETS-Asia stocks fall on likely smaller Fed rate cut, pricier oil

* MSCI Asia-Pacific index down 0.4%, Nikkei loses 0.2%
* Media report puts 25 bps Fed rate cut expectations back in
play
* Stocks lose momentum as 50 bps rate cut possibility fades
* European stock futures little changed to tad higher
* Iran's capture of British tanker heightens regional
tensions
* Gold pulls back from 6-year high
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Shinichi Saoshiro
TOKYO, July 22 (Reuters) - Asia stocks fell on Monday as
investors scaled back expectations of an aggressive Federal
Reserve interest rate cut, while crude oil prices rose on
heightened Middle East tensions following Iran's seizure of a
British tanker.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.4%.
Japan's Nikkei .N225 closed down 0.2% on the more tempered
Fed easing views and caution ahead of the domestic earnings
season which starts this week. .T
The Shanghai Composite Index .SSEC was down 1%, but all
eyes were on the debt of China's new Nasdaq-style STAR tech
board. It had a wild opening day as expected, with most firms
surging and circuit breakers popping in early trade. Hong Kong's Hang Seng .HSI dropped 0.9%. South Korea's
KOSPI .KS11 was flat.
In early European trade, the pan-region Euro Stoxx 50
futures STXEc1 were up 0.06%, German DAX futures FDXc1
inched up 0.02% and Britain's FTSE futures FFIc1 added 0.05%.
Global equity markets had rose briefly towards the end of
last week after dovish comments by New York Fed President John
Williams boosted expectations the central bank would lower rates
by 50 basis points (bps) at its July 30-31 meeting.
But stock markets gave back those gains on Friday, with Wall
Street shares falling, after the New York Fed walked back
Williams' comments by saying his speech was not about potential
policy action at the upcoming Fed meeting.
Expectations for a larger cut were scaled back even more
after the Wall Street Journal reported the Fed was likely to cut
rates by 25 bps this month, and may make further cuts in the
future given global growth and trade uncertainties. "The possibility of a 50 bps cut has almost dissipated
following the WSJ report and the New York Fed's attempt to tone
down earlier comments by Williams," wrote Kenji Yamamoto,
economist at Daiwa Securities.
The dollar and U.S. Treasury yields rose on the greater
likelihood of a shallower rate cut.
The dollar index .DXY against a basket of six major
currencies was steady at 97.174 after rising 0.4% on Friday.
The euro EUR= was little changed at $1.1216 after shedding
0.5% on Friday. The greenback edged up 0.25% to 108.00 yen
JPY= thanks to a rise in U.S yields.
The benchmark 10-year Treasury yield US10YT=RR stretched
Friday's modest gains and climbed to 2.062%.
Still, the broad decline in equity markets limited the rise
in safe-haven Treasury yields.
"A factor which could guide stocks lower this week are
tweets by U.S. President Donald Trump pertaining to trade issues
with China," said Junichi Ishikawa, senior forex strategist at
IG Securities.
"Stocks could decline if he continues to make challenging
trade comments directed at China this week."
Trump maintained pressure on Beijing last week by renewing a
threat to impose tariffs on another $325 billion of Chinese
goods, even as hopes grew that the two sides could soon resume
face-to-face negotiations in a bid to end their year-long trade
war. EXTENDS GAINS
In commodities, Brent crude futures LCOc1 were up 1.55% at
$63.44 per barrel following an increase of about 0.9% on Friday.
Iran's Revolutionary Guards on Friday captured a
British-flagged oil tanker in the Strait of Hormuz after Britain
seized an Iranian vessel earlier this month, further raising
tensions along a vital international oil shipping route.
U.S. crude futures CLc1 advanced 0.77% to $56.06.
Gold slipped from a six-year high as the dollar firmed and
as expectations for a deep rate cut by the Fed were dialled
back.
Spot gold XAU= traded at $1,426.55 an ounce after going as
high as $1,452.60 on Friday, its strongest since May 2013.

(Editing by Kim Coghill and Richard Borsuk)