* Trump pours cold water on Sino-U.S. trade talk hopes
* Fed expected to cut rates by 25 basis points, more seen
* Pound pummelled by rising fear of no-deal Brexit
By Hideyuki Sano and Stanley White
TOKYO, July 31 (Reuters) – Asian shares weakened in early trade on Wednesday, rattled by fresh trade war concerns following threats from President Donald Trump to Beijing, while increasing worries about a no-deal Brexit kept the pound under pressure.
Later in the day, the U.S. Federal Reserve is widely expected to cut interest rates for the first time since the financial crisis more than a decade ago. The expected easing has supported risk asset prices worldwide.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.04% while Japan’s Nikkei slid 0.84%.
Major Wall Street stock averages ended slightly lower on Tuesday, with the S&P 500 losing 0.26%, after Trump warned China against waiting out his current presidential term before finalising a trade deal.
As a new round of U.S.-China trade negotiations started in Shanghai, Trump tweeted that, if he wins re-election in November 2020, the outcome could be no agreement or a harsher one.
“Trump’s comments suggest that U.S.-China trade negotiations are not going well, which is a new negative factor for the markets,” said Osamu Takashima, head of G10 FX strategy at Citigroup Global Markets Japan in Tokyo.
After the bell, Apple shares rose 4.2% as its April-June earnings beat estimates and CEO Tim Cook said “marked improvement in greater China”.
S&P 500 mini futures rose 0.17% in Asia.
The S&P 500 index has risen 2.4% so far this month, bolstered by expectations for Fed easing.
Fed funds rate futures are now fully pricing in a 25 basis point rate cut on Wednesday and another 25 basis point reduction by September.
U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that cemented expectations of Fed rate cuts.
Trump on Tuesday reiterated his call for the Fed to make a large interest rate cut, saying he was disappointed in the U.S. central bank and that it had put him at a disadvantage by not acting sooner.
In Asia, a key manufacturing survey out of China will be a main focus for traders.
In currency markets, the British pound remains near a 28-month low hit the previous day on growing concerns about a disorderly Brexit.
Sterling traded at $1.2164, up 0.13% so far on the day, but not far from $1.2120 marked on Tuesday. It has fallen 4.2% so far this month, on course to log its worst monthly performance since October 2016.
“In addition to Brexit, markets are starting to price in the Bank of England moving to dovish from hawkish at its next meeting, so this drives sterling depreciation,” Citigroup’s Takashima said.
Other major currencies were less volatile with the yen flat at 108.58 yen to the dollar. The euro stood little changed at $1.1158.
Oil prices held firm near two-week highs after 2% gains on Tuesday.
U.S. West Texas Intermediate (WTI) crude gained 0.41% to $58.29 per barrel in early Asian trade. (Editing by Sam Holmes)