Asian stocks cautious as everything rides on dovish Powell


The pan-region Euro Stoxx 50 futures were up 0.43 per cent, Germany's DAX futures rose 0.42 per cent and Britain's FTSE futures gained 0.33 per cent in early European trade.

"But traders need to be careful as Brexit uncertainty remains the major drag on sterling, whilst the dollar is showing some resilience and could be exposed to significant upside risks if Powell today disappoints the market by not being as dovish as investors hope". "The main question now is, are investors pricing too much in terms of rate cuts by year end?"

US stocks ended higher on Wednesday and the S&P 500 briefly crossed 3,000 points for the first time following Powell's remarks.

The S&P 500 Index gained 0.1% as of 10:14 a.m.

'If we are talking about a stronger dollar, then we have to bear in mind comments from President Donald Trump last week, who said, 'Well, perhaps we should start manipulating the dollar.' Overnight, Atlanta Fed President Raphael Bostic said the central bank was debating the risks and benefits of letting the U.S. economy run 'a little hotter.

The Shanghai Composite added 0.82%, whereas both the Shenzhen component and Shenzhen composite additionally gained about 1%.

MSCI's broadest index of Asia-Pacific shares outdoors Japan dropped 0.5% to its lowest since June 20. Yet, this only worked to diminish bets of a 50bps rate cut from the Fed at this month's interest rate decision.

"The focus going forward is USA data, such as tonight's CPI, and whether the economy warrants a 50 basis point rate cut this month".

Fed officials have helped spur a rally in world equities in recent weeks by taking an increasingly dovish tone regarding monetary policy, fuelling expectations they would cut borrowing costs sharply to support a stuttering economy.

Stronger-than-expected employment growth in June tempered expectations that the Fed would opt for aggressive rate cuts at a meeting ending July 31.

The greenback was down 0.5 per cent at 107.960 yen, forced off a six-week high of 108.990 scaled the previous day. Such concerns would encourage a softer-Dollar environment, presenting Asian assets with more potential upside, while safe havens such as Gold and the Japanese Yen could also advance further.

The dollar index against a basket of six major currencies was down 0.25 per cent at 96.873 and extended losses from Wednesday, when it fell back from a three-week peak of 97.588 in the wake of Powell's comments.

Data on Thursday showed annual inflation in the euro zone's biggest economy accelerated in June, but remained below the ECB's target.

In fixed-income markets, the 10-year U.S. Treasury yield fell to 2.037% after dropping on Wednesday from a three-week high of 2.113%.

West Texas Intermediate crude dipped 0.4% to $57.43 a barrel Tuesday.Gold was little changed at $1,394 an ounce.

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

Futures in Japan pointed to a flat start, while contracts rose in Hong Kong and Australia.

TOKYO, July 10 (Reuters) - The dollar edged toward a three-week high against a basket of major currencies on Wednesday, as an unwinding of bets on deep US interest rate cuts pushed Treasury yields higher.