Asia stocks rise, dollar sags as Fed chair sets stage for rate cut
TOKYO (Reuters) - Asian stocks rose and the dollar sagged on Thursday after Federal Reserve Chair Jerome Powell reinforced prospects of a U.S. interest rate cut later this month.
In an appearance before his congressional overseers on Wednesday, Powell confirmed that the U.S. economy is still under threat from disappointing factory activity, tame inflation and a simmering trade war.
Powell said the central bank stands ready to “act as appropriate”.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%, while Japan’s Nikkei added 0.15%.
South Korea’s KOSPI climbed 0.7%. Australian stocks were steady.
U.S. stocks ended higher on Wednesday and the S&P 500 briefly crossed the 3,000-point mark for the first time following Powell’s remarks. [.N]
“The markets had hoped for Powell to express dovish views and they got what they wanted,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
“The focus going forward is U.S. data, such as tonight’s CPI, and whether the economy warrants a 50 basis point rate cut this month.”
A strong June U.S. jobs report released earlier this month had curbed market expectations that the Fed could lower rates by 50 basis points (bps), and the markets had viewed a 25 bps cut as a more likely option.
But the Fed chair’s cautious stance on the world’s largest economy helped revive views of a chance of heftier easing at the next Fed policy meeting on July 30-31.