Economy

Asia shares cautious in case Powell closes rate door

Asia shares cautious in case Powell closes rate door”

"The Fed's consideration of rate cuts is not only about growth but also about inflation, which remains well below target, and inflation expectations, which were breaking to the downside before the Fed signaled the likelihood of cuts".

South Korea climbed 0.6 percent, but Japan's Nikkei lagged with a loss of 0.15 percent.

The Japanese yen traded at 108.95 against the USA dollar after seeing levels below 108.5 earlier in the week In Hong Kong, the Hang Seng index recovered 88.41 points, or 0.3%, to 28,204.69.

Wall Street had been dully circumspect, with the Dow ending yesterday down 0.08 per cent, while the S&P 500 added 0.12 per cent and the Nasdaq 0.54 per cent.

MSCI's broadest index of world stocks .MIWD00000PUS rose 0.42%, with U.S. equities touching record highs following the release of prepared remarks for Powell's testimony before the U.S. House of Representatives Financial Services Committee.

Australian stocks fell 0.4 percent and the Korean market was 0.3 percent lower. In Greater China, suppliers from Hon Hai to AAC Tech lost between 1.3 percent and 2.8 percent.

Expectations for a 50 basis point rate cut at a Fed meeting later this month have evaporated, but investors still expect a 25 basis point rate cut due to weak inflation and worries about the U.S.

"I think the market seems to be veering towards a less dovish message from Powell than was the prevalent a couple of weeks ago", said Bank of New York Mellon senior strategist Neil Mellor.

Global equities will doubtless stay beneath stress after final month's outperformance, Pictet Wealth Administration mentioned in a memo on Tuesday.

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"After a strong rally in June that more than erased the May drawdown, valuations look demanding, underpinning our underweight stance", the firm said.

The dollar was higher against the British pound and emerging market currencies in early trading in Europe Wednesday, but range-bound against most of its peers as the market braced for Federal Reserve Chairman Jerome Powell's two days of testimony before Congress.

In commodity markets, oil prices rose as US crude inventories shrank more than expected and as major producers evacuated rigs in the Gulf of Mexico before a storm.

"What the market shall be searching for is whether or not the language is as dovish as beforehand (ultimately coverage assembly)", mentioned Christy Tan, head of market technique for Asia at Nationwide Australia Financial institution. "There's been some over-dovishness in what the Fed needs to do in the market".

The yen was last 0.28% stronger against the dollar at 108.53, while the euro rose 0.31% against the greenback to $1.1241. The dollar index .DXY , tracking the greenback against six major currencies, was last 0.38% lower.

By 3:45 AM ET (7:45 GMT), the pound was at $1.2458, up from an earlier intra-day low of $1.2444, while it was at 1.1106 euros, having earlier dipped below 1.1100 for the first time since December.

Oil prices were slightly softer as concerns about whether slowing global economic growth would hit oil demand eclipsed tensions over Iran's nuclear programme. US crude was up 82 cents to $58.65 a barrel.

Brent crude futures rose 67 cents to US$64.83, while USA crude gained 83 cents to US$58.66 a barrel.



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