Stocks to Rise in Asia as Fed-Cut Bets Lift: Markets Wrap

Jeannie Matthews
July 21, 2019

John Williams, the influential vice chairman of the Fed's policy-setting board, said in a speech that central banks should move quickly to support the economy when borrowing costs were already low. New York Fed President John Williams on Thursday said policy makers should take preventative measures at the first signs of economic slowdowns. In late USA trading, an index that tracks the dollar against a basket of currencies was down 0.52% at 96.713.

The odds eased to around 40% after the New York Fed's clarification of his speech. The MSCI Asia Pacific Index surged 1.3%, the highest in two weeks on the biggest jump in more than four weeks.

The dollar index, which hit a two-week low of 96.648 on Thursday, was 0.26% higher at 97.042.

Brewer Anheuser-Busch InBev SA was among Europe's biggest gainers, rising almost 5% after the Budweiser maker agreed to sell its Australian subsidiary to Japan's Asahi Group Holdings an $11.3 billion deal and kept the door open to a potential listing of its Asian business.

Still, WTI dropped 7% this week and Brent lost about 5.5% for the week, the steepest losses for both benchmarks since late May.

The central bank has been under pressure to cut rates dramatically and end that shedding of bonds, most notably by President Donald Trump, who on Friday accused the central bank of a "faulty thought process" and also called for an end to "quantitative tightening", a reference to the bond runoff.

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Trump said Friday he liked Williams "first statement much better than his second".

Bucking the firmer trend, Japan Post Holdings shed 0.4% to an all-time low after the Nikkei business daily reported the country's largest private insurance firm Nippon Life requested Japan Post to halt selling its policies at its affiliate post offices. But most analysts do not expect an agreement any time soon, with some predicting a strong risk of further tariff escalation.

"Should these probabilities change, as a result of the Fed potentially indicating a one-and-done attitude this month, then the dollar could rapidly appreciate as the futures market re-positions", said Tadbir. "China trade issues and tensions over Iran are likely to limit the markets' gains".

The market markets have traded very anxiously, Treasury Mnuchin comments notwithstanding, but given the Euro only bounced to 1.1285 as the rates markets went full out Fed policy bazooka pricing mode there wasn't that much Dollars selling versus the Euro in particular. The currency had previously lost 0.6% against its Japanese peer. Asia stocks tracked an advance in US shares. The 2-year yield was at 1.7894% after touching a two-week low of 1.7520%.

The dollar fell to a three-week low at 107.210 yen. The 10-year yield declined to a 10-day trough of 2.023% and was last at 2.0465%.

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