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Asian stock markets : https://tmsnrt.rs/2zpUAr4

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Nikkei falls 2.4%, but S&P 500 futures edge up

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Soft China inflation data signals weak demand

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Dollar bounces on yen as yields come off lows

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ECB seen cutting 25bp on Thursday, Fed the same next week

(Adds China CPI data, updates prices)

By Wayne Cole

SYDNEY, Sept 9 (Reuters) - Asian share markets slid on

Monday after worries about a possible U.S. economic downturn

slugged Wall Street, though U.S. stock futures did rally from an

early dip and bond yields came off their lows.

Data on consumer prices (CPI) from China showed the Asian

giant remained a driver of global disinflation, with producer

prices falling an annual 1.8% in August when analysts had looked

for a drop of 1.4%.

The CPI also missed forecasts at 0.6% for the year, with

almost all the rise in food prices and goods prices up just

0.2%, pointing to subdued domestic demand.

Japan's Nikkei bore the brunt of the selling as tech

stocks declined, losing another 2.4% on top of a near 6% slide

last week.

MSCI's broadest index of Asia-Pacific shares outside Japan

slipped 1.2%, after shedding 2.25% last week,

while South Korea's market fell 1.3%.

On a brighter note, S&P 500 futures and Nasdaq

futures both edged up 0.2% following Friday's slide.

EUROSTOXX 50 futures added 0.3% and FTSE futures

firmed 0.5%.

Fed fund futures dipped as investors wondered

whether the mixed U.S. August payrolls report would be enough to

tip the Federal Reserve into cutting rates by an outsized 50

basis points when it meets next week.

So far, markets imply a 33% chance of a large cut, in part

due to comments from Fed Governor Christopher Waller and New

York Fed President John Williams on Friday, though Waller did

leave open the option of aggressive easing.

"Our read of the data is that the labour market continues to

cool, but we see no sign of the kind of rapid deterioration in

conditions that would call for a 50bp rate cut," Barclays

economist Christian Keller said.

"Importantly, we also see no indication of any appetite for

this in Fed communications," he added. "We retain our call for

the Fed to begin its cycle with a 25bp cut, followed by two more

25bp at the remaining two meetings this year, and a total of

75bp of cuts next year."

Investors are considerably more dovish and have priced in

113 basis points of easing by Christmas and another 132 basis

points for 2025.

Data on August U.S. consumer prices on Wednesday should

underline the case for a cut, if not the size, with headline

inflation seen slowing to 2.6% from 2.9%.

Tuesday sees Democrat Kamala Harris and Republican Donald

Trump debate for the first time ahead of the presidential

election on Nov. 5.

ECB TO EASE

Markets are also fully priced for a quarter-point cut from

the European Central Bank on Thursday, but are less sure on

whether it will ease in both October and December.

"What matters will be guidance beyond September, where

there's strong pressure on both sides," analysts at TD

Securities noted in a note.

"Wage growth and services inflation remain strong,

emboldening the hawks, while growth indicators are flagging

softer, emboldening the doves," they added. "Quarterly cuts are

likely more consistent with the new projections."

The prospect of global policy easing boosted bonds, with

10-year Treasury yields hitting 15-month lows and

two-year yields the lowest since March 2023.

Bonds ran into some profit taking on Monday as two-year

yields nudged up to 3.690% and the 10-year to 3.743%, though the

curve was still near its steepest since mid-2022.

The yen also gave up some of its gains as the dollar firmed

0.4% to 142.7 yen and away from Friday's trough of

141.75. The euro held at $1.1086, having briefly been

as high as $1.1155 on Friday.

In commodity markets, the downward trend in bond yields kept

gold restrained at $2,497 an ounce and short of its

recent all-time top of $2.531.

Oil prices found some support after suffering their biggest

weekly fall in 11 months last week amid persistent concerns

about global demand.

Brent bounced $1.01 to reach $72.07 a barrel, while

U.S. crude firmed $1.02 to $68.69 per barrel.