Asian Stock Gains Muted; Dollar Slips on Powell: Markets Wrap

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Asian stocks posted modest gains, following their U.S. counterparts, after comments by Federal Reserve Chairman Jerome Powell cemented market bets for a rate cut this month. Treasury yields edged lower and the dollar retreated.

Shares rose in South Korea, ticked higher in Japan and were flat in Australia. U.S. futures were little changed. Earlier, the S&P 500 briefly topped 3,000 for the first time after Powell signaled a willingness to lower rates, citing a slowing global economy and trade issues. Minutes from the Fed’s June meeting confirmed an inclination among officials to ease policy soon. But stocks came off their highs, with financial shares leading the pullback.

The yield on 10-year Treasuries fell as low as 2.04% Wednesday after climbing above 2.10% for the first time in a month. It traded at 2.05% Thursday. Oil held gains after surging more than 4% in New York overnight.

“A rate cut in July is now all but certain,” said James McCann, senior global economist at Aberdeen Standard Investments. “The strength of last week’s jobs number did lead some to think that the Fed may pause for thought. It’s clear from this that they won’t.”

Investors have taken Powell’s comments as confirmation that rates are headed lower at the Fed’s next meeting on July 30-31. Traders stepped up bets on a half a percentage point move, though the consensus still foresees a quarter-point cut.

Elsewhere, strong manufacturing data from France and low demand at an auction of German bunds weighed on government debt in Europe. The pound halted a drop to a two-year low as data showed the U.K. economy rebounded in May.

Here are some key events coming up:

  • Powell testifies to Senate Banking Committee on Thursday
  • ECB minutes are due on Thursday.
  • A key measure of U.S. inflation — the core consumer price index, due Thursday — is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.
  • U.S. producer prices are due on Friday.

Here are the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 9:05 a.m. in Tokyo. The S&P 500 rose 0.5% Wednesday.
  • Topix Index was little changed.
  • Kospi Index rose 0.8%.
  • S&P/ASX 200 was flat.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1% after an 0.3% decline Wednesday.
  • The euro climbed 0.1% to $1.1261.
  • The British pound rose 0.1% to $1.2510.
  • The Japanese yen added 0.2% to 108.26 per dollar.
  • The offshore yuan was flat at 6.8720.

Bonds

  • The yield on 10-year Treasuries fell one basis point to 2.05%.

Commodities

  • West Texas Intermediate crude rose 0.3% to $60.57 a barrel after surging 4.5% Wednesday.
  • Gold futures rose 0.3% to $1,424 an ounce.

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