GLOBAL MARKETS-Stocks fall as Fed's pledge relief rally fades

* Eyes on U.S. COVID relief package talks
* U.S. dollar languishes near two-year lows
* German government bond yields edge down
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* For Reuters Live Markets blog: LIVE/

(Updates throughout)
By Tom Arnold and Swati Pandey
LONDON/SYDNEY, July 30 (Reuters) - Global shares fell on
Thursday as the Federal Reserve's pledge to use all its tools to
support the U.S. economy failed to reassure investors uneasy
about a stalemate on fiscal support and rising coronavirus
cases.
Europe's STOXX 600 .STOXX slipped 0.7% on a busy day for
earnings. Earlier gains in Asian shares were undone, with MSCI's
broadest index of Asia Pacific shares outside of Japan
.MIAPJ0000PUS edging down 0.1%.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was 0.3% lower, ending three days of
gains.
Investors were worried about a surge in virus cases in the
United States, along with parts of Europe and Asia. Australia,
India, Vietnam, and North Korea were all on high alert.
On Wednesday, all Fed members voted as expected to leave the
target range for short-term interest rates between 0% and 0.25%,
where it has been since March 15, when the virus was beginning
to hit the nation. The unchanged policy setting together with a pledge the Fed
would use its "full range of tools" if needed boosted risk
appetite overnight. All three Wall Street indexes closed higher.
But the Fed was already disappearing in the rear-view mirror
on Thursday. Investor focus returned to negotiations over a new
coronavirus relief package for the world's largest economy.
U.S. President Donald Trump said on Wednesday that his
administration and Democrats in Congress were still "far apart"
on a new coronavirus relief bill. A failure to
agree risks letting a $600-per-week unemployment benefit lapse
when it expires this week.
"Were that program to expire completely, it's a meaningful
hit to the economy and thus to sentiment and risk appetite,"
said James Athey, investment director, Aberdeen Standard
Investments.
"At these equity prices there is absolutely no margin baked
in. They are priced for utter perfection. Hence a little unease
this morning."
In currencies, the dollar index recovered after crashing to
93.17, the weakest since June 2018. USD/
The dollar =USD has been fallen on expectations the Fed
will maintain its ultra-loose monetary policy for years to come
and on speculation it will allow inflation to run higher than it
has previously indicated before raising interest rates.
The dollar's weakness has supported the euro EUR=EBS ,
which is headed for its biggest monthly gain in 10 years, having
risen about 5% so far this month. It was last down 0.3% at
$1.1754.
The risk-sensitive Australian dollar AUD=D3 slipped 0.6%
to $0.7149 after reaching its highest levels since April 2019.
German government bond yields edged towards two-month lows
after data showed the economy contracted by 10.1% in the second
quarter, its steepest plunge on record. Germany's 10-year yield DE10YT=RR was down 2 basis points
to -0.52% in early trade, nearing Wednesday's two-month lows.
In commodity markets, oil prices fell amid concern that
surging coronavirus infections worldwide will jeopardise a
recovery in fuel demand. O/R
Brent crude futures LCOc1 were down 0.5% at $43.52 a
barrel. U.S. crude futures CLc1 eased 0.8% to $40.96.
Spot gold XAU= was off 0.83% at $1,954.2 an ounce.

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(Editing by Larry King)