Asian shares, pound fall on mounting Brexit fallouts

By Hideyuki Sano

TOKYO (Reuters) - Asian shares wilted and the British pound dived to a three-decade low on Wednesday as the European Union's economic outlook darkened in the Brexit gloom.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent while Japan's Nikkei <.N225> dropped almost two percent.

Trading in three UK property funds has been suspended so far this week as battle a rush of redemptions from investors fearing a slump in British property values.

The Bank of England also took steps to ensure British banks keep on lending, by lowering the amount of capital banks must hold in reserve, as the UK business confidence plunged after the vote.

Brexit also rekindled worries about the euro zone's weaker economies, particularly Italy as its banks struggle with bad debt.

The economic picture outside Europe was hardly encouraging, building expectations of global economic stagnation.

U.S. factory orders declined and Chinese Premier Li Keqiang said it could be hard for his country to sustain 6.7 percent growth in the second quarter.

"There's no inflation prospects, there's no strong growth. The only thing we have is uncertainty," said Hiroko Iwaki, senior bond strategist at Mizuho Securities.

"The rise in shares last week wasn't based on any improvement in corporate earnings. There's no reason not to buy bonds now," she said.

The 10-year U.S. Treasuries yield hit a low of 1.357 percent on Tuesday and last stood at 1.365 percent.

The 20-year Japanese Government bond yield fell to zero percent on Wednesday, a day after the Swiss yields fell to negative all the way out to 50 years .

Safe-haven gold hit a two-year high $1,360.30 per ounce.

In the currency market, the British pound dived about 0.5 percent to a new three-decade low of $1.2950 while the euro slipped to $1.1054 from Tuesday's $1.11875.

The yen gained to one-week high of 101.25 to the dollar.

The gloomy global economic outlook also hit oil prices, which on Tuesday posted their biggest decline since June 24.

Brent crude futures fell 4.2 percent on Tuesday and last stood at $48.13 per barrel.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)