Asian stocks were mixed in early trading on Wednesday, with U.S. stocks posting fresh gains as traders parsed Federal Reserve Chairman Jerome Powell's comments on the state of the U.S. economy.
MSCI’s Asia-Pacific index fell, though advancers outnumbered decliners. Stocks in Hong Kong and Japan rose, while Australia, South Korea and mainland China fell. U.S. and European stock futures also rose.
China’s consumer prices rose another modestly in June, hovering near zero for a fifth month, a sign that deflationary pressures are still hampering the economic recovery. Factory-gate prices remained stuck in deflationary territory.
The S&P 500 advanced for a sixth straight session at the close of trading on U.S. stock exchanges on Tuesday, its longest winning streak since January, as traders continued to bet the Federal Reserve will cut interest rates this year and the Nasdaq 100 hit a record high.
Federal Reserve Statements
Jerome Powell was careful not to offer a timetable for a rate cut in his comments to U.S. lawmakers yesterday. However, he stressed growing signs of a slowing labor market after government data showed unemployment rose for a third straight month. Short-term Treasuries outperformed bets that they would likely benefit from the easing of monetary policy.
In his remarks, Powell said regulators were close to agreeing to change a plan to force big banks to hold more capital, a big win for Wall Street banks. The overhaul is tied to Basel III, an international agreement that followed the 2008 financial crisis and aims to prevent bank failures and other crises.
Michael Feroli of JPMorgan Chase said Powell's speech continued the trend of preparing the market for a rate cut later this year, adding that Powell largely stuck to the script when it came to the economy.
momentum in china
In New Zealand, the central bank kept interest rates steady. Australian bonds fell in early trading, echoing moves in longer-dated Treasuries.
Traders are bracing for China's bonds to start pulling back from record low yields, with the central bank now armed with hundreds of billions of yuan of securities available for sale.
China Vanke Co. shares fell after the homebuilder warned that losses widened sharply in the second quarter. Samsung shares were little changed after the company’s largest labor union announced an indefinite strike. The union is currently staging a three-day strike that began Monday.
Shares of Baidu Inc. surged as much as 11% in Hong Kong, after the U.S.-traded stock rose 8.5% as the company’s self-driving taxi, called Apollo Robotaxy, gains popularity in China.
Tech Stocks Marathon
Currencies, in turn, remained muted. The dollar strength index was range-bound, while the Japanese yen weakened against the dollar. The emerging market currency index was little changed yesterday.
US Treasury Secretary Janet Yellen said the labor market is no longer driving inflation in the US economy to the extent it was earlier in the recovery from the coronavirus pandemic, echoing earlier comments by the Federal Reserve chair.
In Asia, Japan's biggest banks called on the Bank of Japan to make big cuts to its monthly bond purchases during hearings for market participants at the central bank, according to people who attended the sessions.
