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

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Nikkei falls 2.4%, S&P 500 futures go flat

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Bonds supported by recession risk, shift from equities

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

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, while dragging bond yields and commodity

prices lower as investors avoided risk assets for safer

harbours.

Japan's Nikkei bore the brunt of the early selling

as a stronger yen pressured exporters, losing 2.4% on top of a

near 6% slide last week.

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

slipped 0.6%, after losing 2.25% last week.

S&P 500 futures and Nasdaq futures were both a

fraction lower, after Friday's slide.

Fed fund futures were little changed 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 only a 29% 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

115 basis points of easing by Christmas and another 127 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%.

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.

The 10-year was last at 3.734% and the two at 3.661%,

leaving the curve near its steepest since mid-2022.

The drop in yields encouraged a further unwinding of yen

carry trades which saw the dollar sink as deep as 141.75 yen

on Friday before steadying at 142.41 early on Monday.

The euro held at $1.1090, having briefly been as

high as $1.1155 on Friday.

Data on consumer prices (CPI) from China due later Monday

are expected to show the Asian giant remains a force for

disinflation, with producer prices seen falling an annual 1.4%

in August.

The CPI is forecast to edge up to 0.7% for the year, from

0.5%, mainly due to rising food prices.

Figures on China's trade account due Tuesday are expected to

show a slowdown in both export and import growth.

Also on Tuesday, Democrat Kamala Harris and Republican

Donald Trump debate for the first time ahead of the presidential

election on Nov. 5.

In commodity markets, the slide in bond yields kept gold

restrained at $2,496 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 added 57 cents to $71.63 a barrel, while U.S.

crude firmed 60 cents to $68.27 per barrel.