Asia stocks firm as Fed props up rate cut expectations

Daniel Fowler
July 20, 2019

"I don't think a few rates cuts is going to make the difference, whether it's 25 or 50 basis points at the end of this month", Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co., told Bloomberg TV from Boston. Britain's FTSE 100 index gained 0.6 per cent and Germany's DAX rose 0.75 per cent.

"It's better to take preventative measures than to wait for disaster to unfold, " Mr. Williams said in remarks prepared for delivery at a central banking conference in New York City. Chinese shares are gaining despite reports trade negotiations between the USA and China had faltered over restrictions on Chinese telecommunications giant Huawei: the Shanghai Composite Index is up 0.8% and Hong Kong's Hang Seng Index is 1.1% higher.

Wall Street ended in positive territory yesterday following Williams' comments, with Asia and Europe picking up the baton with solid gains Friday before profit-taking set in amid lingering concerns about the global growth outlook and a lack of progress in China-US trade talks.

Brent futures prices are edging higher today after a U.S. Navy ship destroyed an Iranian drone in the Strait of Hormuz. It was, however, still on track to break a six-week streak of weekly gains.

The S&P 500 adding 0.4% higher and the Nasdaq Composite rose 0.3%.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1 per cent, bouncing back from the previous day's losses, while Japan's Nikkei advanced 2 per cent.

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The index was up only 0.3 percent on the week, as riskier assets were partly capped by US President Donald Trump's reiteration of his threat to impose further duties on Chinese imports. But most analysts do not expect an agreement any time soon, with some predicting a strong risk of further tariff escalation.

Meanwhile, global oil benchmark Brent crude rose 1.5%, rebounding from the month's lows and marking a second day of volatility in the prices.

Dovish comments from Fed's Williams on Thursday weighed on the UST yields and dented the dollar.

The greenback was up 0.3% at 107.620 yen, crawling away from a three-week trough of 107.210 on Thursday after the New York Fed's clarification of Williams' comments. Among other big gainers against the dollar, the pound was up 0.98% at $1.2552 after hitting a 27-month low of $1.2382 the previous day. Treasury yields and the United States dollar slipped. US rates futures implied traders fully expect the Fed to lower rates in two weeks. The 10-year yield declined to a 10-day trough of 2.023% and was last at 2.0465%.

In commodities, USA crude oil futures reversed a large part of the previous day's deep losses, briefly rising 1.45 per cent to $56.10 per barrel before easing back to $55.81, up 0.9 per cent.

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