(Updates with European market moves)
* World stocks drop for 3rd day as hopes for large Fed cut
fade
* Chemical giant BASF shares fall almost 6% after profit
warning
* Deutsche Bank shares continue to tumble after axing 18,000
staff
* Apple slumps on downgrade; suppliers in Asia, Europe fall
* Dollar firm as markets focus on Fed chair's testimony this
week
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, July 9 (Reuters) - World stocks fell for a third
straight day on Tuesday, as a stinging warning came from German
chemicals giant BASF about the effects of the global trade war
and traders hedged bets on a hefty U.S. interest rate cut later
this month.
With global macroeconomic clouds looming and critical policy
signals due from U.S. Federal Reserve chief Jerome Powell on
Wednesday, the headlines and mood focused on three individual
stocks.
Shares in BASF slumped almost 6% in Europe after the German
chemicals giant issued what one trader described as a "shocking"
profit warning, blaming a global slowdown and trade war between
the United States and China.
Deutsche Bank tumbled 4% - having already dropped 5.4% the
previous day after it axed 18,000 staff - while Apple's
overnight drop of more than 2% on Wall Street after a broker
downgrade dragged the tech sector lower.
"Both from a bottom-up and top-down perspective, equity
market valuations appear far too ambitious," analysts at Morgan
Stanley wrote in a note.
It was particularly stark, they said, as the U.S. business
cycle was in a downturn and both forward-looking indicators like
global PMIs and global trade are now in contraction territory.
"Indeed, companies have begun cutting their 2019 profit
forecasts, citing the trade conflict as a reason."
In the currency markets, the big question remained the
potential reaction to the weaker outlook from the world's top
central banks.
U.S. Fed chairman Powell gives a testimony before Congress
on Wednesday. FED/DIARY Money market futures 0#FF: are still
fully pricing in a 25 basis point (bps) cut at the Fed's July
30-31 meeting, but have almost priced out a larger 50 bps move
that had been seen as a real possibility a couple of weeks ago.
FEDWATCH
The dollar changed hands at 108.78 yen JPY= , having risen
in the previous session to its highest in more than a month.
The dollar index .DXY versus a basket of six major
currencies was also a touch higher at 97.432, while the euro
dropped as low as 1.1204 EUR= , its weakest level since mid
June. /FRX
"It would be pretty disruptive at this stage for Powell to
rule out a cut in July or dampen expectations of a cut in July,"
said Michael Metcalfe, head of global macro strategy at State
Street Global Markets.
"The last few Fed speakers, albeit non-voting speakers, have
suggested July is not a done deal... and even now, if you look
at economists' forecasts, there is not a consensus that there
will be a move, and yet the market is 100% priced."
BREXIT FACTOR
Elsewhere, the pound stood at 1.2485 GBP=D4 , not far from
six-month lows of $1.2481 touched on Friday. Britain's
parliament will weigh an amendment later aimed at ensuring it
cannot be sidestepped if the next UK prime minister wants to
pursue a no-deal Brexit divorce from the European Union.
Overnight in Asia, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS dropped 0.4% but pared
earlier losses, having traded at its lowest level since June 19.
Chinese blue-chips .CSI300 ended down 0.3%, while Hong
Kong's Hang Seng .HSI fell 0.7%. Japan's Nikkei .N225 was
the only outlier as gains in a few heavyweights in the index
helped it edge up 0.1%. .T Apple's suppliers, such as Murata Manufacturing 6981.T and
Taiyo Yuden 6976.T , fell 2% and 4%, however, after Rosenblatt
Securities cited a "fundamental deterioration" for the U.S.
gadget giant over the next 6-12 months.
In Greater China, suppliers from Hon Hai 2317.TW to AAC
Tech 2018.HK also lost between 1.4% and 3.1% and in Europe
Infineon IFXGn.DE , ASM ASMI.AS and STMicroelectronics
STM.MI slipped about 2%. .EU
Among commodities, oil prices were slightly softer as
concerns about whether slowing global growth would hit demand
eclipsed tensions over Iran's nuclear programme.
Brent crude LCOc1 futures fell 0.2% to $64.01 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 futures shed
0.4% to $57.46.
Gold prices also ticked lower, as the dollar scaled its
multi-week highs. Spot gold XAU= was down 0.2% at $1,393.03
per ounce and U.S. gold futures GCv1 fell 0.3% to $1,395.70 an
ounce.
Wall Street futures were 0.4% to 0.6% percent lower.
ESc1 1YMc1 NQc1 . .N
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Dot plot, Fed funds futures July 9 https://tmsnrt.rs/2YLmEzm
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