Asian Stocks Set for Gains; Dollar Slips on Powell: Markets Wrap

Lloyd Doyle
July 11, 2019

In his prepared statement to be delivered at the semi-annual congressional testimony, reiterated that the central bank will act as appropriate to sustain the USA economic growth and uncertainties since the June FOMC meeting continues to dim the economic outlook.

US stocks were set to open higher on Thursday, with healthcare shares in focus, a day after Wall Street's main indexes touched new highs as comments from Federal Reserve chairman Jerome Powell cemented the case for an interest rate cut this month. 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.

After his remarks, interest rate futures appeared to price in greater odds of an aggressive rate cut this month. Expectations for a 50 basis point (bps) rate cut at a Fed meeting later this month have evaporated, but investors still expect a 25 bps cut due to weak inflation and worries about growing business fallout from the US-China trade war.

The cooling in USA rate fever has seen bonds give back just a little of their rally. Oil's climb was triggered by constrained United States supplies, with production in the Gulf of Mexico being reduced by about a third given the possibility of an incoming hurricane, along with the steep decline reported in U.S. crude inventories.

The dollar also gained to 108.92 yen, though the brighter French data helped the euro gain to $US1.1225, still down from its $US1.1412 level of just a couple of weeks ago. Fed Chairman Powell is scheduled to testify before the house committee on Wednesday. "So we've seen a little bit of a rally".

An early rally in USA stocks lost some steam after President Donald Trump tweeted a complaint that China is "letting us down" by not buying USA farm products.

The S&P 500 was little changed Thursday afternoon after crossing 3,000 earlier in the session, while the Dow Jones Industrial Average surpassed 27,000. The dollar could continue to creep higher if Powell's comments on the USA economy are perceived as neutral or even slightly hawkish, which would support the argument that additional rate cuts will be limited. Traders will be eyeing that testimony for further clues after a measure of USA consumer prices rose more than forecast in June.

Benchmark 10-year notes US10YT=RR last rose 4/32 in price to yield 2.0439%, from 2.056% late on Tuesday.

West Texas Intermediate crude climbed 0.6% to $60.81 a barrel, reaching the highest in seven weeks.

The dollar's gains took the shine off gold, which eased 0.3% to $1,393.68 per ounce XAU= .

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