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China sets firm fix for yuan, soothing devaluation worry

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Wall St futures dip after Alphabet earnings disappoint

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Dollar loses ground to yen, Treasury yields ease

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Gold hits new peak amid trade tensions

By Wayne Cole

SYDNEY, Feb 5 (Reuters) - Asian stock markets struggled

to make headway on Wednesday as Wall Street futures took a knock

from earnings disappointment, and the dollar backtracked on the

yen following a fall in Treasury yields.

Investors were also nonplussed by comments from President

Donald Trump that the U.S. would like to take over the

war-ravaged Gaza Strip and develop it economically.

The suggestion came out of the blue and underlined the risk

of more policy uncertainty and market volatility ahead.

The mood was helped a little when Beijing set a firm fix for

its yuan, countering concerns it might allow the currency to

slide to offset the impact of tariffs on its exports.

China has so far made a relatively restrained response to

Trump's added 10% in tariffs, announcing levies that covered

just $14 billion of U.S. exports to China.

"The measures are fairly modest, at least relative to U.S.

moves, and have clearly been calibrated to try to send a message

to the U.S. without inflicting too much damage," said Julian

Evans-Pritchard, head of China economics at Capital Economics.

"The risk is that China's retaliation proves too modest to

exert any real pressure on the U.S. to reverse tariffs, but

sufficiently defiant to trigger a further escalation."

A survey did show China's services activity expanded at a

slower pace in January, but analysts suspected much of that was

due to the timing of the Lunar New Year holidays.

Chinese blue chips returned from holiday with a

minor dip of 0.2%.

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

added 0.6%, and South Korea's main index

bounced 1.2%. Japan's Nikkei went flat as the yen rose

broadly along with local bond yields.

EUROSTOXX 50 futures fell 0.5%, while FTSE futures

eased 0.2% and DAX futures 0.4% amid the

lingering risk of U.S. taxes on trade.

YEN RALLIES

Having bounced on Tuesday, Wall Street futures ran into

selling when Alphabet earnings missed forecasts as it ramped up

spending on capex. Its shares dived 7.6% in extended trading,

wiping $192 billion off its market capitalisation.

S&P 500 futures fell 0.4% and Nasdaq futures

lost 0.5% in response. Results out Wednesday include Uber, Ford,

Qualcomm and Walt Disney.

The delays to tariffs on Canada and Mexico had at least

eased worries the Federal Reserve might be severely restricted

in how far it could cut interest rates and prompted a bounce in

fund futures.

Yields on two-year Treasuries were back at 4.224%

and off a peak of 4.282% hit on Monday.

The pullback in yields coincided with a retreat in the

dollar from its peaks, with the dollar index down at

108.050 from Monday's spike top of 109.880.

The euro firmed to $1.0380, a remarkable round

trip from the two-year trough of $1.0125 struck at the start of

the week. Likewise, the dollar had recoiled to 1.4327 Canadian

dollars from a 22-year high of 1.4792.

The dollar also slipped 0.7% on the Japanese yen to touch a

seven-week low at 153.09, breaking support at 153.72.

Japanese government bond yields hit new multi-year highs

after upbeat data on wages supported expectations of further

tightening by the Bank of Japan this year.

In commodity markets, gold hit a fresh all-time high at

$2,848 an ounce aided in part by the pullback in the

dollar and yields.

Oil prices were weighed by China's tariffs on imports of

U.S. oil, but found support from reports Trump had restored his

"maximum pressure" campaign on Iran in a bid to drive Iranian

oil exports to zero.

Brent fell 35 cents to $75.85 a barrel, while U.S.

crude lost 22 cents to $72.48 per barrel.