GLOBAL MARKETS-Shares drop as China consulate closure fans Sino-U.S. tensions

* MSCI Asia ex-Japan -0.3%; Nikkei futures down 0.6%
* Investors fear further escalation of U.S.-China tensions
* Global stimulus seen providing structural support for risk
assets - Saxo
* Trump says other consulate closures possible
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Andrew Galbraith and Elizabeth Dilts Marshall
SHANGHAI/NEW YORK, July 23 (Reuters) - Asian shares slipped
on Thursday as investors' worries over rising tensions between
Washington and Beijing overcame hopes for more stimulus, after
the United Sates ordered the closure of China's consulate in
Houston amid accusations of spying.
China said the order was an "unprecedented escalation" by
Washington, and a source said Beijing was considering shutting
the U.S. consulate in Wuhan in retaliation.
U.S. President Donald Trump said that other consulate
closures were "always possible". After ticking higher earlier in the morning session, MSCI's
broadest index of Asian shares ex-Japan .MIAPJ0000PUS was last
down 0.3%, weighed down by slumping Chinese stocks. The Shanghai
benchmark dropped 1.67% following four days of gains.
Australian shares .AXJO were flat and Hong Kong's Hang
Seng index .HSI reversed earlier gains to lose 0.08%.
Nikkei futures NKc1 shed 0.13% to 22,755, with Japanese
markets closed for a holiday.
S&P mini-futures ESc1 slipped 0.08%.
Further escalation of Sino-U.S. tensions was increasingly
likely, said Kay Van-Petersen, global macro strategist at Saxo
Capital Markets in Singapore.
"The biggest near-term risk to me ... is Trump going further
and breaking on the Phase One deal," he said.
But he said unprecedented stimulus measures to boost
pandemic-battered economies would continue to provide structural
support for riskier assets.
"The forces of liquidity are just unparalleled ... we're
seeing what happened post the GFC, but we're seeing it on
steroids," he said.
"It's rare that you see both monetary and fiscal policy
turned on, and then when they are they only turn on for a little
bit."
Hopes for another round of U.S. stimulus and strong
corporate earnings boosted Wall Street overnight even as
Republicans and Democrats remain far apart on how much to spend
on the next round of coronavirus relief. The Dow Jones Industrial Average .DJI rose 0.62%, the S&P
500 .SPX gained 0.57% and the Nasdaq Composite .IXIC added
0.24%. In commodity markets, spot gold XAU= fell 0.3% to
$1,865.84 per ounce, but remained near a nine-year peak on
Thursday, with prices up nearly 23% on the year. Investors have
flocked to the safe-haven metal as they seek shelter from a
potential reversal in U.S. equities. Gold has been helped by a weak dollar, which remained in the
doldrums near more than four-month lows on Thursday, easing
0.05% to 94.965. The greenback was flat against the yen at
107.14 JPY= and against the euro at $1.1568.
Oil was also little-changed, with U.S. crude CLc1 flat at
$41.90 a barrel and global benchmark Brent crude LCOc1 up one
cent to $44.30 per barrel.