* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei climbs 1.5% on hopes for dovish Fed
* Global bonds yields dive after Draghi flags stimulus
* Trump says to meet Xi at G20, trade talks to resume
* Gold, oil lead commodities higher on reflation trade
By Wayne Cole
SYDNEY, June 19 (Reuters) - Asian share markets jumped on
Wednesday as investors dared to hope the Federal Reserve would
follow the lead of the European Central Bank and open the door
to future rate cuts at its policy meeting later in the day.
Indeed, ECB President Mario Draghi's shock turnaround on
easing fuelled talk of a worldwide wave of central bank
stimulus, firing up stocks, bonds and commodities. Adding to the cheer was news U.S. President Donald Trump
would meet with Chinese President Xi Jinping at the G20 summit
later this month, and that trade talks would restart after a
recent lull. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS climbed 0.6% in early trade, adding to a 1% gain
the day before.
Japan's Nikkei .N225 rose 1.5% and South Korea .KS11
1.1%. E-Mini futures for the S&P 500 ESc1 were a fraction
firmer after a upbeat Wall Street session.
The Dow .DJI ended Tuesday with gains of 1.35%, while the
S&P 500 .SPX rose 0.97% and the Nasdaq .IXIC 1.39%. The S&P
500 has gained 6% so far this month to be 1% from the all-time
high hit in early May.
All eyes are now upon the Fed which is scheduled to release
a statement at 1800 GMT on Wednesday, followed by a press
conference by Chairman Jerome Powell shortly after. Yet the heightened anticipation also creates risks the Fed
might fail to meet investors' high expectations.
"Market expectations for a dovish shift are nearly
universal, the only question seems to be the degree," said Blake
Gwinn, head of front-end rates at NatWest Markets.
Futures 0#FF: are almost fully priced for a quarter-point
easing in July and imply more than 60 basis points of cuts by
Christmas FEDWATCH .
"Markets will be looking for validation of this pricing," he
added. "We think this represents a fairly high bar for the Fed
to deliver a dovish surprise."
SUB-ZERO YIELDS
BofA Merrill Lynch's latest fund manager survey spoke
volumes about the sea change in sentiment.
Allocation to global equities dropped 32 points to a net 21%
underweight, the lowest since March 2009, while the bond
allocation hit the highest since September 2011.
Interest rate expectations collapsed, while concerns about a
trade war soared to be the top risk for investors, ahead of
monetary policy impotence, U.S. politics and a slower China.
The shift was clear in bond markets where German yields
DE10YT=RR hit record lows deep in negative territory, while
Japanese yields JP10YT=RR sank to the lowest since august 2016
at -0.145%.
Yields on the U.S. 10-year note US10YT=RR reached the
lowest since September 2017 at 2.016%, a world away from the
3.25% top touched in November last year.
The fallout in currencies was significantly less, in large
part because it was hard for one to gain when all the major
central banks were under pressure to ease.
The euro did pull back a bit after Draghi's comments, but at
$1.1198 EUR= was still well within the recent trading range of
$1.1106-$1.1347.
The dollar remained sidelined against the yen at 108.53
JPY= , and a shade firmer on a basket of currencies at 97.628
.DXY .
In commodity markets, the rate-cut buzz kept gold near
14-month highs at $1,346.62 per ounce XAU= .
Michael Hsueh, an analyst at Deutsche, noted the decisively
dovish shift in central bank expectations was bullish for gold.
"This provides the desired backdrop - one in which investors
are less likely to be concerned about the opportunity cost of
holding a non-yielding asset, particularly versus the increasing
stock of negative-yielding debt," he said.
Reflation trades also supported oil prices, as did hopes for
a thawing in the Sino-U.S. trade dispute. O/R
Brent crude LCOc1 futures bounced 40 cents to $62.54,
while U.S. crude CLc1 firmed 45 cents at $54.35 a barrel.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
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(Editing by Sam Holmes)