GLOBAL MARKETS-Mind your backs, dollar coming through!

(Updates prices, details throughout)
* Dollar enjoys broad-based rally against major currencies
* Fed cuts rates by 25 basis points, further cuts uncertain
* Sterling crumbles again before Bank of England meeting
* Weak currencies, banks help keep European stocks steady
* Emerging-market stocks on worst run in almost a year
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* U.S.-China trade talks end with no progress

By Marc Jones and Swati Pandey
LONDON/SYDNEY, Aug 1 (Reuters) - The dollar charged to its
highest in more than two years on Thursday after the Federal
Reserve spoiled hopes of a run of U.S. interest rate cuts.
A blizzard of global data and events was going on, but it
was Fed Chair Jerome Powell's remarks on Wednesday that set the
markets running. Powell said the first U.S. rate cut in over a
decade was "not the beginning of a long series of rate cuts" .
The dollar's reaction said it all. The DXY index surged to
its highest in more than two years, euro/dollar dropped below
$1.11 for the first time since May 2017, and Brexit-hobbled
sterling hit 30-month lows just above $1.21 GBP=D3 .
World stocks had recoiled overnight and emerging markets
.MSCIEF had their longest run of falls in almost a year.
EMRG/FRX
"Markets interpreted the Fed's communication as slightly
hawkish and therefore further rate cuts in the immediate future
were somewhat priced out," said David Milleker, senior economic
advisor at Union Investment. "And the dollar strengthened. All
in all, the Fed did not achieve what it presumably wanted."
U.S. Treasuries US2YT=RR were sold off as investors scaled
back their pre-Fed expectations for at least 100 basis points of
cuts in the near term. Yields on 10-year notes US10YT=TWEB
climbed as high as 2.058% in Europe from a U.S. close of 2.007%.
Core euro zone bond yields were rising, too, although
-0.428% German Bund levels were still extraordinary. "I didn't
say it's just one rate cut," Powell had been careful to
emphasise after Wednesday's 25-basis-point move.
Instead, he characterised it as "a mid-cycle adjustment to
policy", citing signs of a global slowdown, U.S. trade tensions
and a desire to boost inflation.
Wall Street fell afterwards and E-minis futures ESc1 for
the S&P 500 ESc1 were pointing 0.15% lower.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 0.8%, extending losses for a fifth day to
the lowest since mid-June and posting its biggest one-day
percentage drop in a month.
Japan's Nikkei .N225 rose, reversing early declines.
Australian shares .AXJO declined 0.4%. Losses by Chinese
shares .CSI300 ended down 0.8%.
"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."

TRADE TALKS
Adding to worries, the United States and China on Wednesday
ended a brief round of talks without much progress in ending
their year-long trade war. Downbeat data and factory surveys on Thursday had also
pointed to further weakness for Asia's trade-reliant economies.
South Korea's exports fell for an eighth straight month in
July amid weak global demand and a dispute with Japan. 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. "Trade should
continue to drag on corporate confidence, capex and global
growth in the near term."
In Europe's foreign exchange markets, sterling GBP=D3
dropped as low as $1.2101 before a Bank of England meeting
that's expected to leave its 0.75% interest rate unchanged but
result in plenty of interesting discussion.
Fears of a no-deal Brexit now that Boris Johnson is prime
minister continue to afflict the pound, although it was
fractionally higher against a weakening euro at 91.17 pence
EURGBP=D3 .
"Sterling remains vulnerable to a further escalation in
Brexit tensions and we anticipate the market will likely
discount higher risks of a ‘no deal' outcome in the weeks
ahead," said Roger Hallam, currency chief investment officer at
J.P. Morgan Asset Management.
Elsewhere, the Aussie dollar AUD=D3 slipped below key
chart support of $0.6832 to as low as $0.6828, a level not seen
since an early January "flash crash".
The kiwi NZD=D3 hit a six-week trough of $0.6535 on
expectations the Reserve Bank of New Zealand will cut rates next
week.
U.S. crude futures CLc1 fell 76 cents to $57.82 per barrel
after comments on the rate outlook. Brent was down 71 cents at
$64.34. O/R
Spot gold XAU= also fell, to $1,405.26. GOL/

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