Morning Bid: Markets confounded by Trump's Gaza proposal

(Reuters) - A look at the day ahead in European and global markets from Wayne Cole.

First off, nobody knows what to make of President Donald Trump's sudden suggestion that the United States take over the Gaza strip and turn it into the Riviera of the Middle East - once the Palestinians are resettled elsewhere, of course.

It's not clear if this was a serious proposal, given it sounds eerily reminiscent of an idea floated last year by Trump's son-in-law Jared Kushner that Gaza's waterfront property could be very valuable and Israel should remove civilians while the strip was cleaned up.

Markets have seemingly taken it with a pinch of salt and there's been no obvious reaction in oil prices.

Otherwise, it's been a messy session so far in Asia with idiosyncratic moves in share markets, and a pullback in the U.S. dollar following a drop in Treasury yields.

While Wall Street had edged up on Tuesday, Nasdaq futures are now down about 0.5% following disappointing earnings from Alphabet as it spends heavily on capex. The Google owner's shares shed 7.6% after hours, wiping $192 billion off its market worth.

Asia share markets were mixed with some relieved that China had been restrained in its retaliation against President Donald Trump's tariffs. JPMorgan notes that China's additional levies would apply to products that last year accounted for just $14 billion of imports.

Beijing also set a firm 7.1693-per-dollar fix for its yuan as markets returned from the Lunar New Year holidays, countering concerns it might allow a sharp depreciation to offset the impact of tariffs. The dollar did rise 0.5% on the onshore yuan, but that merely catches up to where the offshore market already was and remains well short of Monday's record top at 7.3765.

Chinese blue chips were off just a shade, a resilient performance given they were returning from holiday to an actual trade war.

Elsewhere, the dollar was mostly on the retreat, slipping 0.6% on the Japanese yen to around 153.33, partly reflecting a continued rise in JGB yields to highs not seen since 2008. The rise in the yen erased early gains made by the Nikkei.

European share futures are all modestly in the red, no surprise given Trump continues to warn that the European Union is in his sight for tariffs but without specifying what he wants in return.

Key developments that could influence markets on Wednesday:

- Service PMIs for EU, Germany, UK and France; EU producer prices; ECB chief economist Philip Lane speaks

- U.S. ISM services survey, ADP employment report, Treasury refunding announcement

- Speeches by Federal Reserve Board Governor Michelle Bowman and Vice Chair Philip Jefferson, along with Fed Presidents Barkin and Goolsbee

(By Wayne Cole; Editing by Edmund Klamann)