By Shinichi Saoshiro
TOKYO (Reuters) – Asia stocks fell on Monday as investors withdrew expectations of an aggressive cut by the Federal Reserve, while increasing Middle East tensions following Iran's attacks by a British tanker lifted crude oil prices.
MSCI's widest index of Asia-Pacific shares outside Japan () was down 0.4%.
Japan's Nikkei () fell 0.3% on more temperate Fed easing views and caution in front of the domestic earnings season starting this week.
The Shanghai Composite Index () was down 1
Hong Kong's Hang Seng () fell 0.9%. South Korea's KOSPI () shed 0.1%.
Global stock markets had risen shortly at the end of last week following bold New York Fed comments President John Williams (NYSE 🙂 increased expectations the central bank would lower prices by 50 basis points (bps) July 30 to July 31
Men The stock markets returned these gains on Friday, with Wall Street stock falling after the New York Fed went back to Williams commenting that the speech was not about potential political action at the upcoming Fed meeting.
Expectations for a larger cut were reduced even more after the Wall Street Journal reported that the Fed would likely cut rates by 25 fps this month, and may make further cuts in the future with global growth and trade uncertainty.
"The possibility of a 50 bps cut has almost disappeared after the WSJ report and the New York Fed's attempt to tone down earlier Williams comments," Kenji Yamamoto, economist at Daiwa Securities, wrote.
The dollar and the US Treasury are more likely to have a lower decline.
The () against a basket with six main currencies was steady at 97,179 after increasing 0.4% on Friday.
The euro () was little changed to $ 1.11215 after cutting 0.5% on Friday. The greenback increased 0.2% to 107,970 yen
Reference point 10-year government bond () extended Friday's modest gains and climbed to 2,056%.
Nevertheless, the broad decline in stock markets limited the increase in safe haven Treasury yields.
"One factor that can lead stocks lower this week is tweets by US President Donald Trump on trade issues with China," said Junichi Ishikawa, senior forex Strategist at IG Securities.
"Shares may decline if he continues to challenge trade comments directed at China this week."
Trump maintained pressure on Beijing last week by renewing the threat of imposing tariffs on another $ 325 billion Chinese goods, even as hopes grew that the two sides could soon resume face-to-face negotiations to end their year long trade war.
OIL EXCHANGES GAINS
In goods, Brent's crude futures () were up 1.4% at $ 63.35 per barrel after a gain of about 0.9% on Friday.
On Friday, Iran's revolutionary guards captured a British flagged oil tanker in the Gulf after Britain took an Iranian vessel earlier this month, increasing tensions along an important international oil transport route.  US raw futures () advanced 0.95% to $ 56.15.
Gold sank from a six year high as the dollar strengthened and as expectations of a deep interest rate cut of the Fed was called back.