GLOBAL MARKETS-Asian shares stumble, dollar firms as Fed dampens bets on more rate cuts

(Updates prices throughout, adds analyst comment in par 8)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan down 0.4%, Nikkei gives up early losses
* Dollar enjoys broad-based rally against major currencies
* Fed cuts rates by 25 basis points, further cuts not
certain
* U.S.-China trade talks end with no progress

By Swati Pandey
SYDNEY, Aug 1 (Reuters) - Asian shares fell to six-week lows
on Thursday while the dollar jumped to two-year highs as the
U.S. Federal Reserve poured cold water on market expectations of
a lengthy easing cycle following a 25 basis-point rate cut.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS faltered 0.6%, extending losses for a fifth day
to the lowest since mid-June.
Japan's Nikkei .N225 reversed early losses and were a
shade higher, while Australian shares .AXJO declined 0.2%.
Losses in Chinese shares accelerated after it opened lower with
the blue-chip index .CSI300 down 0.8%.
E-minis for the S&P500 ESc1 clawed back early losses and
were marginally higher, after a sharp drop on Wall Street.
Global share markets recoiled overnight after U.S. Federal
Reserve Chairman Jerome Powell said Wednesday's easing was "not
the beginning of a long series of rate cuts".
Powell characterised the rate cut as "a mid-cycle adjustment
to policy", citing signs of a global slowdown, simmering U.S.
trade tensions and a desire to boost too-low inflation. Markets
took that as a sign that sharp further cuts were not imminent.
Riskier assets such as shares have had a golden run in the
past decade as global central banks have kept monetary policies
stimulatory, world growth has been strong and corporate profits
have surged. But there are now growing worries over how much
longer the rally can run as trade disputes drag on the global
economy.
"We believe the Fed is trying to thread the needle,
balancing market jitters about slowing global growth with robust
consumer spending and a strong job market in the U.S.," said
Nick Maroutsos, co-head of global bonds at Janus Henderson.
"In other words, by cutting just 25 bps, the Fed is trying
to bolster market confidence while also keeping some dry powder
in reserve in case of an economic shock."
The United States and China on Wednesday ended a brief round
of trade talks without much progress in ending their year-long
tariff war. Downbeat data and factory surveys on Thursday pointed to
further weakness for Asia's trade-reliant economies.
South Korea's exports tumbled for an eighth straight month
in July amid persistently weak global demand and an escalating
dispute with Japan, while its new export orders shrank the most
in about six years. South Korea, the world's sixth-largest exporter, is the
first major industrial economy to release trade data each month,
providing an early assessment on the health of global demand.
Pressure on Chinese factories eased slightly, but
manufacturing activity continued to shrink. "The broader global trade dynamic remains a challenge,"
Morgan Stanley strategist Michael Zezas said, referring to trade
skirmishes between Japan and South Korea and U.S.-Europe
negotiations over auto tariffs.
"Trade should continue to drag on corporate confidence,
capex and global growth in the near term."

GOLD AND BONDS
Yields on U.S. Treasuries US2YT=RR rose as investors
scaled back expectations for at least 100 basis points of easing
in the near term.
Yields on 10-year bonds US10YT=TWEB climbed as high as
2.053% in early Asian hours from a U.S. close of 2.007%. They
were last at 2.037%.
In foreign exchange, the dollar enjoyed a broad-based rally
against major currencies, including the euro and Antipodean
currencies on expectations monetary policies in Europe,
Australia and New Zealand will remain accommodative.
The dollar index .DXY against a basket of six major
currencies finished July 2.5% higher and was last up 0.3% at
98.817. Against the Japanese yen JPY= , the dollar broke above
109 to jump to the highest since end-May.
The common currency EUR= fell to $1.1032, the lowest since
May 2017. It was last at $1.1047.
The Aussie AUD=D3 slipped below key chart support of
$0.6832 to as low as $0.6828, a level not seen since early
January when a currency "flash crash" briefly took it to
$0.6715.
The kiwi NZD=D3 hit a six-week trough of $0.6535 as
markets wager on a rate cut by the Reserve Bank of New Zealand
next week.
U.S. crude futures CLc1 fell $1.08 to $57.95 per barrel in
the wake of Powell's comments on the rate outlook. Brent was
down 91 cents at $64.46. O/R
Spot gold XAU= made a new two-week trough on Thursday
after falling to 1,405.50.

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(Editing by Kim Coghill and Jacqueline Wong)