MORNING BID EUROPE-To cut or not to cut, that is the question

* A look at the day ahead from deputy EMEA markets editor Sujata Rao. The views expressed are her own.

Aug 22 (Reuters) - Gangbusters second-quarter results from U.S. retailers Target and Lowe yesterday show the U.S. consumer continues to happily spend, and the figures come on top of Walmart’s forecast beating earnings last week. Target shares surged 20% and Lowe jumped 10%, helping lift Wall Street almost 1% on the day. That’s again got many asking whether the U.S. really needs a rate-cutting cycle. The Federal Reserve board doesn’t seem to think so -- the July meeting minutes yesterday showed members united in wanting to signal they were not on a pre-set path to more easing. A couple of members favoured a half-point cut, but several apparently voted for no change at all.

If we get more of that hawkish bent from Fed Chairman Jerome Powell at Jackson Hole tomorrow, it could well dash hopes for a prolonged easing cycle. But money markets have barely budged in their assessment that the Fed is set to cut rates by 100 basis points by the end of 2020. It might take a really hawkish statement by Powell tomorrow to move that assumption.

Doves would argue that since the Fed meeting hopes have faded further for a trade deal with China, and economic indicators from the rest of the world have been pretty dire. Japan today proved that remains the case, as its flash PMIs showed manufacturing contracted in August for the fourth month, led by a slump in export orders. Services continue to be the bright spot, expanding at the fastest pace in two years. Let us see whether euro zone and U.S. readings paint a similar picture – analysts expect euro zone manufacturing PMI to slip further from its six-and-a-half-year low of 46.5 to 46.2, driven by rapidly weakening German manufacturing.

As for market moves, the Chinese yuan has slumped to 11-year lows against the dollar, forcing state-run banks to support the currency by selling dollars. A catalyst possibly was U.S. President Donald Trump' saying on Wednesday he was "the chosen one" to address trade imbalances with China. Asian currencies have taken their cue from China and fallen as well -- the Korean won was down 0.4% and Aussie and Kiwi dollars around 0.2%. The safe-haven yen is up 0.3%, reversing the fall seen in U.S. trading hours when the greenback was briefly boosted by the Fed minutes. The minutes also lifted US Treasury yields briefly, inverting the two-10 curve for the first time in a week. The curve has since normalised but is close to inverting again. Yields are down 1 to 2 bps this morning with two-year yields at 1.55% compared with last week's low of 1.467%. German yields are likewise lower. German 30-year yields, which rose yesterday after the first-ever sale of 30-year debt at negative yields, are likewise 2 bps lower.

On stocks, the positive momentum from Wall Street doesn’t seem to have carried over into Asia. A pan-Asian index ex-Japan fell half a percent, led by Hong Kong, which lost almost 1%, hurt by the continued protests and the effect they are having on the economy and investment. Remember, Alibaba has just postponed a $15 billion listing in the city state. Chinese shares closed up around 0.1%. World stocks are flat, albeit set for a weekly gain so far after three weeks of declines. European markets are opening 0.3% to 0.4% lower. U.S. equity futures are also negative.

Sterling is flat after two days of falls ahead of British PM Boris Johnson's meeting with France's Emmanuel Macron today on Brexit. The euro has not reacted to this or to Italian political news, but Italian yields have tumbled to two-and-a-half-year lows below 1.30% before we get updates from Rome on the next steps after PM Giuseppe Conte's resignation

European shares opened weaker as anxious investors avoided risky bets before August PMI data from key euro-zone economies and the Jackson Hole summit on Friday. German PMI data later in the morning will show whether its economy has improved since its contraction last quarter. The German DAX is down 0.4%.

In corporate news, NMC Health shares are up 35% after Reuters reported that two investor groups, one of them backed by China's Fosun, are making a bid for a stake in the company. Osram shares are rising 2% in premarket trade after the German lighting maker cleared the way for AMS to make its takeover bid. AMS shares are down 3%.

In earnings, Nordic companies Elekta and GN Store are seen rising 3% to 4% after their estimate-beating results. Dutch payments services provider Adyen is seen jumping 5% after solid first-half results. CRH is seen up 2% after the Irish building materials supplier reported strong numbers across the board and announced a further 350 million-euro share buyback. Swiss teclo Sunrise Communications escalated its defence of its planned takeover of Liberty Global's Swiss unit UPC, blasting a shareholder that was fighting the deal. British drugmaker GlaxoSmithKline shares could get a boost after its new HIV two-drug injection met its main goal in a late-stage study.

In emerging markets, China's yuan fell to an 11-year low against the dollar, with support from major state-owned banks in both the spot and forwards markets. Hong Kong shares tumbled 0.9%, their most in a week, as HSBC, Standard Chartered and Bank of East Asia published newspaper advertisements urging the restoration of social order. After four sessions in a row of gains, MSCI's emerging-market shares index slipped 0.4% amid fresh uncertainty about U.S. interest rates and global fiscal stimulus.

With the dollar supported by market expectations of aggressive rate cuts tempered, most emerging-market currencies fell. The Turkish lira and South African rand both dropped. In Asia, the Korean won and the Philippine peso tracked the yuan lower. The Indonesian rupiah was little changed before a central bank meeting later in the day that's expected to keep the key interest rate on hold. The Indian rupee shed 0.2%, after minutes from the central bank's monetary policy meeting revived expectations for further easing. Egypt's central bank is likely to cut its key rates by at least 100 basis points later today, according to a Reuters poll.

S&P Global has told Lebanese officials it will allow a six-month grace period before deciding whether to downgrade the country's sovereign credit rating, a local newspaper said on Thursday without citing sources. Economic advisers to Argentina's presidential front-runner and opposition leader Alberto Fernandez said he would seek alternatives to the current administration's austerity measures. SCHEDULED EVENTS AND DATA Flash manufacturing PMI business surveys for August from around the world Indonesia central bank policy decision Europe corp events: Antofagasta, CRH, GN Store Nord, Ambu Switzerland Q2 industrial production Turkey August consumer confidence EZ Aug consumer confidence UK Aug distributive trades survey Sweden July jobless Poland July retail sales US weekly jobless claims Fed’s annual Jackson Hole conference kicks off, through Aug 25. Riksbank chief Ingves speaks (Reporting by Sujata Rao, editing by Larry King)