* MSCI Asia ex-Japan up 0.41% as HK plays catch-up
* Trump says trade deal should favour U.S.
* Global PMIs show manufacturing weakness
* RBA set to cut benchmark cash rate
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, July 2 (Reuters) - Asian shares wobbled on
Tuesday, U.S. Treasury yields fell and gold rose as weak global
manufacturing activity reinforced worries about slowing growth
while uncertainties over the prospect of a Sino-U.S. trade deal
also hurt sentiment.
President Donald Trump said on Monday that any trade deal
with China would need to be "somewhat tilted" in favour of the
United States. The U.S. government also threatened tariffs on $4
billion of additional European Union goods in a long-running
dispute over aircraft subsidies. U.S. S&P 500 e-mini futures ESc1 were up 0.1% and MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 0.41%, helped by a 1.38% gain in Hong Kong
shares .HSI as investors caught up to Monday's global rally.
Markets in Hong Kong had been closed on Monday for a public
holiday.
But Chinese blue-chips .CSI300 dipped 0.05% and Korean
shares .KS11 lost 0.27%.
"Euphoria that the trade negotiations are back on the table
has probably waned and again the cautious tone is getting hold
of the markets going forward," said Prakash Sakpal, an economist
with ING in Singapore, adding that a stronger recovery would
require more support.
"We need to see a great deal of negotiation progress on the
China-U.S. trade war. And we should also see more regional
policy stimulus actually kicking in to prevent any further
deterioration in economic activity across the region," he said.
Australian shares .AXJO managed to push up 0.29% on
expectations that the Reserve Bank of Australia will cut its
benchmark cash rate by 25 basis points to a record low of 1.0%
at a meeting later in the day. The central bank's decision is
expected at 0430 GMT.
Japan's Nikkei .N225 was up 0.11%.
Global shares had rallied strongly on Monday after the
United States and China agreed on the weekend to restart trade
negotiations aimed at resolving their year-long trade war and
Washington said it would postpone further tariffs.
U.S. President Donald Trump also offered concessions,
including an easing of restrictions on tech company Huawei
HWT.UL .
Yet, with the previous rounds of Sino-U.S. negotiations
breaking down in acrimony, investors were now turning to the
prospects of actual progress in talks to settle the dispute that
has dented global trade, business investment and economic
growth.
The fresh U.S. tariff threats against Europe also point to a
worrisome prospect of a broadening trade dispute, said Michael
McCarthy, chief markets strategist at CMC Markets in Sydney, in
a note to clients.
"The problem is the widening of the dispute. Europe, the
U.S. and China account for almost two thirds of global GDP," he
said. "An ongoing disruption to trade between these three major
economies, prosecuted for domestic political purposes, could
sink global growth."
WEAK MANUFACTURING
Manufacturing surveys over the past 24 hours underscored
those risks. Factory activity in the euro zone shrank faster
last month than previously thought, and U.S. manufacturing
activity slowed to a near three-year low in June.
"Global manufacturing PMI took the wind from the sails of
risk assets outside of those which are stock related as it
becomes apparent this is a real and genuine slowdown the world
is experiencing," Greg McKenna, strategist at McKenna Macro,
said in a note to clients.
While stocks on Wall Street ended higher, they pared early
gains that had seen the benchmark S&P 500 index briefly surpass
its previous record high.
The Dow Jones Industrial Average .DJI rose 0.44% to
26,717.43, the S&P 500 .SPX gained 0.77% to 2,964.33 and the
Nasdaq Composite .IXIC added 1.06% to 8,091.16.
Over recent trading sessions, risk assets have also been
held back by a tempering of expectations by U.S. Federal Reserve
policymakers for aggressive rate cuts at this month's meeting.
"With the easing of Sino-U.S. trade frictions there will
certainly be an improvement in downward pressure on the U.S.
economy, and the need for the Fed to ease will clearly lessen,"
analysts at Jianghai Securities said in a note.
Market expectations that the Fed would implement a
relatively large rate cut in July have fallen, with the
probability of a 50 basis-point cut at 17.5%, from close to 50%
last week. FEDWATCH
The cautious market mood pushed the yield on benchmark
10-year Treasury notes US10YT=RR lower to 2.0171%, compared
with its U.S. close of 2.033% on Monday, while the two-year
yield US2YT=RR , watched as a gauge of rate expectations, edged
down to 1.7751% from a U.S. close of 1.787%.
But the safe-haven yen was flat in a quiet currency market,
with the dollar buying 108.42 JPY= , and the euro EUR= lost
just 0.05% to $1.1279. The dollar index, which tracks the
greenback against major rivals .DXY was unchanged at 96.847.
In commodity markets, worries over the outlook for the
global economy weighed on oil. U.S. crude CLc1 dipped 0.39% to
$58.86 a barrel and global benchmark Brent crude LCOc1 was
down 0.23% at $64.91 per barrel.
But spot gold XAU= gained 0.33% to trade at $1,388.65 per
ounce. GOL/