* U.S. manufacturing ISM survey hits decade low
* Bulls hope U.S.-China talks will ease manufacturing woes
* Fed fund futures price in 80% chance of Oct Fed rate cut
* Asia shares down 0.6%, European shares seen down 0.2%-0.4%
By Hideyuki Sano
TOKYO, Oct 2 (Reuters) - Global shares fell to one-month
lows on Wednesday after U.S. manufacturing activity tumbled to
more than a decade low, sparking worries that the fallout from
the U.S.-China trade war is spreading to the U.S. economy.
A slowdown in U.S. economic growth would remove one of the
few remaining bright spots in the global economy and come just
as Europe is seen as close to falling into recession.
MSCI's gauge of stocks across the globe .MIWD00000PUS ,
covering 49 markets, dipped 0.06% to a low last seen in early
September, after shedding 0.83% in the previous session.
European shares are expected to drop, with European stock
futures STXEc1 FDXc1 FFIc1 trading down 0.2%-0.4%.
In Asia, MSCI's ex-Japan Asia-Pacific shares index
.MIAPJ0000PUS dropped 0.6%, with Australian shares .AXJO
falling 1.3% and South Korean shares shedding 1.5%. Japan's
Nikkei .N225 slid 0.4%. China markets are closed for a
one-week holiday.
Hong Kong's Hang Seng index .HSI was down 0.3% after a
market holiday the previous day. The index fell as much as 1.2%
in early trade. On Tuesday, Hong Kong police shot a teenage
protester, the first to be hit by live ammunition in almost four
months of unrest in the Chinese-ruled city. Data on Hong Kong September retail sales is due later on
Wednesday.
"Nothing other than a terrible number is conceivable here,"
ING chief Asia-Pacific economist Rob Carnell said in a note,
adding that he was watching Hong Kong events "with a growing
sense of despair."
Adding to tensions in Asia, North Korea carried out at least
one more projectile launch on Wednesday, a day after it
announced it will hold working-level talks with the United
States at the weekend. On Wall Street, the S&P 500 .SPX lost 1.23% to hit
four-week lows.
Selling was triggered after the Institute for Supply
Management's (ISM) index of factory activity, one of the most
closely-watched data on U.S. manufacturing, dropped 1.3 points
to 47.8, the lowest level since June 2009. A reading below 50 indicates contraction in the
manufacturing sector. Markets had been expecting the index to
rise back above 50.
The data came after euro zone manufacturing data showed the
sharpest contraction in almost seven years. "In terms of the outlook on manufacturing, U.S-China trade
talks planned next week is everything. If that goes well, we
could well see a V-shaped recovery in the ISM data in coming
months," said Hirokazu Kabeya, chief global strategist at Daiwa
Securities.
"That means we can't just bet on a further decline in the
U.S. economy now. On the whole I don't think we need to change
our view that the U.S. economy remains relatively solid," he
added.
The poor data lifted the Fed funds rate futures price
sharply, with the November contract FFX9 now pricing in about
an 80% chance the U.S. Federal Reserve will cut interest rates
on Oct. 30, compared to just over 50% before the data.
U.S. President Donald Trump once again lashed out at the
Federal Reserve on Tuesday, saying the central bank has kept
interest rates "too high" and that a strong dollar is hurting
U.S. factories. It is another question, however, whether the Fed will cut
interest rates as hastily as Trump, and financial markets, want.
"We don't think the Fed will cut rates this month. The Fed
will probably want to cut rates in December, looking at the
strength of the economy around that time when new tariffs on
China will set in," said Toshifumi Umezawa, strategist at Pictet
Asset Management.
"Given divides in opinion among Fed policy makers, it will
be difficult to come to the conclusion by this month," he added.
Just on Tuesday, Chicago Fed President Charles Evans said
the Fed can keep rates for now and there is scope to raise rates
slightly over the next few years if the economy continues to
grow. In the currency market, the U.S. dollar slipped from
Tuesday's two-year high against a basket of currencies as the
ISM survey shook the notion that the U.S. economy will withstand
the trade war.
The yen rose to 107.85 yen per dollar JPY= , from Tuesday's
low of 108.47.
The euro stood at $1.0933 EUR= , having bounced off a near
2 1/2-year low of $1.0879 hit on Tuesday.
The Australian dollar fetched $0.6713 AUD=D4 , having hit a
10 1/2-year low of $0.6672 the previous day after the Reserve
Bank of Australia cut interest rates and expressed concern about
job growth.
Gold rose to $1,479.80 per ounce XAU= from a two-month low
of $1,459.50 hit on Tuesday on the back of a robust U.S. dollar.
The weak U.S. data pushed oil prices to near one-month lows,
although a surprise drop in U.S. crude inventories helped them
to recoil in Asia.
Brent crude LCOc1 futures rose 0.9% to $59.42 a barrel,
after hitting a four-week low of $58.41 on Tuesday, while U.S.
West Texas Intermediate (WTI) crude CLc1 gained 1.4% to $54.36
per barrel after hitting a one-month low of $53.05.
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