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Asian stocks halt rally, eyeing China’s stimulus, Powell’s testimony




  • Nikkei crashes, yen at 7-month low after BOJ meeting
  • China expected to cut interest rates after growth disappointed
  • US closed for holiday, awaiting Powell’s testimony
  • BOE set to raise interest rates by 25bps on Thursday, oil falls

SYDNEY, June 19 (Reuters) – Asian shares fell on Monday, consolidating gains after their best weekly run in five months, as investors looked to China’s interest rate decision and U.S. Federal Reserve Chairman Jerome Powell’s testimony for clues on the way forward.

Europe is set to extend the decline when markets there open, with pan-regional Euro Stoxx 50 futures down 0.7%. US markets are closed for June 10, with Wall Street futures mostly flat in Asia.

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 0.8% on Monday, after hitting a four-month high last session and ended up 3% for the week, the best since January.

Japan’s Nikkei (.N225) fell 1.3%, after hitting a three-decade high on Friday, supported by the Bank of Japan (BOJ) leaving its ultra-easy policy stance unchanged, sending the yen to a 7-month low level against the US dollar.

Cash Treasuries were untraded, while futures rose a fraction due to low liquidity.

In China, hopes for stronger stimulus grew, but the lack of concrete details from a cabinet meeting on Friday disappointed investors. China blue chips (.CSI300) fell 0.8%, while Hong Kong’s Hang Seng index (.HSI) fell 1.6%.

Goldman Sachs on Sunday cut its forecast for China’s GDP growth this year to 5.4% from 6.0%, joining other major banks in cutting growth expectations for the world’s second-largest economy.

“At this point, the economy is in a tug of war between slowing growth momentum and increasing political support,” Goldman analysts said.

“We consider that growth headwinds are likely to be sustained while policymakers are constrained by economic and political considerations in delivering meaningful stimulus.”

The People’s Bank of China is widely expected to cut its benchmark prime rate on Tuesday, following a similar cut in medium-term loans last week.

US Secretary of State Antony Blinken met China’s top diplomat Wang Yi on Monday. As he wraps up his rare visit to Beijing, all eyes are on whether Blinken would also meet Chinese President Xi Jinping later in the day.

POWELL TAKES THE STAGE

After a week in which the stock market cheered the Fed’s decision to skip a rate hike in June, investors are also looking to a series of Fed speakers this week, with Powell set to deliver congressional testimony on Wednesday and Thursday.

Some officials have already sounded hawkish, and with the dot plots indicating two more hikes, markets are pricing in a 70% probability that the Fed will raise interest rates by a quarter point in July before holding steady for the rest of the year. .

“Fed Chair Powell Gives House and Senate Testimony Focusing on Whether July FOMC (Federal Open Market Committee) Meeting Is Really ‘Live'” and Whether Fed Dot Plots of Two More Hikes Are a True Basis, Depending on the Data or More .“ambitious”, said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

The Bank of England also meets on Thursday when it is set to raise interest rates by a quarter of a point to a 15-year high of 4.75%. Markets are betting that the British central bank’s interest rates will rise to almost 6% this year.

In currency markets, the dollar index was little changed against major rivals at 102.33 on Monday, after falling 1.2% the previous week, the most in five months.

The yen was undermined by a dovish BOJ, hitting a seven-month low of 141.97 per dollar, while the hawkish European Central Bank, which raised interest rates by a quarter of a point last week, helped the euro hold close to a five-week peak of 1.093 dollars.

Oil prices fell more than 1 percent on Monday. U.S. crude futures fell 1.5% to $70.74 a barrel, and Brent crude fell 1.4% to $75.52 a barrel.

Gold prices were flat at $1,957.39 an ounce.

Reporting by Stella Qiu; Editing by Christopher Cushing and Tom Hogue

Our standards: Thomson Reuters Trust Principles.



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