(Corrects spelling of name in paragraph 8)
* Graphic: 2020 asset performance
* Graphic: World FX rates in 2020
* Reuters Live Markets blog: By Elizabeth HowcroftLONDON, Aug 20 (Reuters) - The Federal Reserve's doubts overthe U.S. economic recovery kept markets in the red on Thursday,even though European stock indexes spent the morning recoveringfrom initial losses.Wall Street was knocked from its recent highs on Wednesdayafter the Fed's minutes from its July meeting spooked investorsby showing that the swift labour market rebound seen in May andJune had likely slowed. The S&P 500 had reached an all-time high earlier in the weekas prices recovered to their pre-pandemic levels. The sudden bearishness spilled into Asian markets overnightand continued in the European session, although shares startedto recover as the morning progressed.MSCI's broadest index of Asia-Pacific shares outside Japanhad its biggest daily decline in five weeks while the MSCI world equity index , which tracksshares in 49 countries, was down 0.6% at 1042 GMT.The pan-European STOXX 600 fell 0.8% and London'sFTSE 100 was down 1.14% . Several Fed policymakers said they may need to ease monetarypolicy to help get the economy through the coronavirus pandemic."It's easy to forget that we've just experienced one of thelargest and most severe economic shocks on record," said KasperElmgreen, head of equities at Amundi."This story is not over yet, despite what the markets mightbe indicating," he said."We are navigating a ship here with unusually low forwardvisibility and a very wide range of outcomes."Despite the dovish minutes, U.S. Treasury yields and thedollar rose with investors focusing on parts of the minutes thatshowed policymakers downplaying the need for yield caps andtargets.The dollar index, which measures the currency against abasket of major peers, was choppy overnight and last at 93.015,up less than 0.1% on the day ."The key question for investors is whether the policyresponses are enough to mitigate the economic damage," BHGlobal, a fund managed by Brevan Howard, said in an interimreport published on Thursday."Many businesses face solvency risks that are not addressedby borrowing; a debt overhang cannot be cured by more borrowingno matter how cheap it may be," the fund's report added."Improved financial conditions are narrowly focused on ahandful of large companies and benefiting stakeholders who needrelatively little economic assistance. The result is thatfinancial assets are expensive by many standard metrics."So long as a V-shaped recovery in risky assets fails tocreate a V-shaped recovery in economic activity, this tension isa recipe for increased volatility," it said, adding that theU.S. presidential elections in November could be a catalyst forsuch volatility.Spot gold rebounded overnight but fell when European marketsopened.
It was down 0.2% at 1046 GMT, at $1,926.4615 per ounce .Oil prices fell, as major producers warned of a risk todemand recovery. OPEC and its allies pressed oil nations that are pumpingabove output targets to cut more in August to September. Brent crude was down 49 cents, or 1.1%, at $44.88 abarrel, while U.S. oil was down 48 cents, or 1.1%, at$42.45 a barrel.It will take at least two years for the euro zone to fullyrecover from its deepest recession on record, according to aReuters poll of economists. Minutes from the European Central Bank's July meeting aredue at 1130 GMT.Germany's benchmark 10-year Bund yield fell for the fifthday in a row, hitting its lowest in more than a week at-0.499% .Markets also remained cautious about acrimonious U.S.-Chinarelations.China's commerce ministry said the two countries have agreedto hold trade talks "in the coming days" to evaluate their Phase1 trade deal, struck six months ago. Major central banks will reduce the frequency of seven-daydollar liquidity operations to once a week from September due tolow demand and reduced financial market tension, the Bank ofEngland said. They are currently held three times a week and areoften met with no demand. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Emerging markets World stocks and oil vs COVID-19 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Elizabeth Howcroft; Editing by Alex Richardsonand Steve Orlofsky)
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