GLOBAL MARKETS-Asian shares hit 2-mth lows as escalating Sino-U.S. trade row unnerves markets

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan falls for a seventh day in a row
* Share decline follows losses in Wall Street Friday
* U.S. slaps 10% tariffs on $300 bln Chinese imports
* Markets price in sharper U.S. monetary policy easing

By Swati Pandey
SYDNEY, Aug 5 (Reuters) - Asian shares extended their losses
on Monday as a sharp escalation in the Sino-U.S. trade war kept
finiancial markets on edge, while the Japanese yen and bonds
held near recent peaks as nervous investors stuck with perceived
safe havens.
U.S. President Donald Trump abruptly decided on Thursday to
slap 10% tariffs $300 billion in Chinese imports, stunning
markets and ending a month-long trade truce. China vowed on
Friday to fight back. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell for a seventh straight day to a two-month
trough of 502.83, down 0.25%, marking the longest stretch of
losses since October 2018.
Japan's Nikkei .N225 slipped 1.1% to the lowest since
early June, while Australian shares .AXJO were also down for
their fourth straight session in the red. South Korea's Kospi
.KS11 tumbled 1.2% to hit the lowest since Dec.2016.
Oil prices were also pulled down again on demand worries.
The grim mood followed declines on Wall Street on Friday
with MSCI's gauge of world stocks .MIWD00000PUS posting its
largest weekly loss of the year.
"Aftershocks from President Trump's Thursday (tariff)
announcement... are set to dominate the global economic and
financial landscape in coming weeks and months," said Ray
Attrill, head of forex strategy at National Australia Bank.
The trade war between the world's two largest economies has
already disrupted global supply chains and slowed economic
growth.
The abrupt escalation capped a critical week for global
markets after the U.S. Federal Reserve delivered a widely
anticipated interest rate cut and played down expectations of
further easing.
However, investors were not buying Fed Chair Jerome Powell's
claim that the 25-basis-point rate reduction was a mere
"mid-cycle adjustment to policy".
Futures are now pricing in deeper cuts than before last
week's Fed meeting. The terminal U.S. rate 0$FF: is now seen
at 1.22%, 93 basis points below the current effective rate.
Expectations of further monetary policy easing sent the
dollar skidding. It held near a seven-month trough against the
Japanese yen at 106.57 JPY= while the dollar index .DXY
against a basket of six major rivals steadied at 98.08 after two
straight days of losses.
The yen and the Swiss franc CHF= were boosted by
safe-haven demand from the escalating trade tensions. Trump is
also eyeing tariffs on the European Union though he hasn't said
anything officially yet.
The euro EUR= held firm after two days of gains against
the dollar at $1.1113.
Sterling GBP= hovered near 2017 lows at $1.2155, pressured
by concerns of Britain exiting the European Union without a deal
in place. The pound has been whiplashed since late last month
when Boris Johnson, a figurehead for the "leave" campaign in the
2016 Brexit referendum, became the country's prime minister.
The Australian dollar AUD=D3 , a liquid proxy for emerging
market assets, hovered near a seven-month trough at $0.6792
after losing 1.6% last week. The Reserve Bank of Australia (RBA)
will hold its monthly policy meeting on Tuesday where it is
widely expected to hold rates at all-time lows of 1%.
Safe-haven assets have been in vogue with German 10-year
government bond yields DE10YT=RR on Friday dropping to an
all-time low of -0.502% and the country's entire government bond
yield curve turning negative for the first time ever.
Benchmark 10-year Treasury notes US10YT=RR held near
all-time highs to yield 1.8550% on Monday. Last week, yields
touched their lowest since Trump's election in November 2016.
Spot gold XAU= was slightly firmer at $1,442.11, within
striking distance of a recent six high of $1,452.60.
Oil extended losses with U.S crude CLc1 off 31 cents at
55.35 and Brent LCoc1 down 58 cents at $61.31.

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(Editing by Shri Navaratnam)