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Asian shares subdued on dampened U.S. rate cut expectations

Published 2019-07-07, 08:41 p/m
© Reuters.  Asian shares subdued on dampened U.S. rate cut expectations
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* Asian stock markets: https://tmsnrt.rs/2zpUAr4

* Asia ex-Japan subdued, Australian shares, Nikkei slips

* Strong U.S. payrolls temper Fed rate cut expectations

* Turkish lira near 2-week lows on c.bank independence worries

By Swati Pandey

SYDNEY, July 8 (Reuters) - Asian shares slipped on Monday as investors wagered on a less aggressive policy easing in the United States, while the Turkish lira held near two-week lows after the country's president dismissed its central bank governor over the weekend.

Global equities have generally been bolstered by expectations that central banks will keep interest rates at or near record lows to boost economic growth.

Those expectations were tempered by a U.S. labour report that showed nonfarm payrolls jumped 224,000 in June, beating forecasts for 160,000, in a sign the world's largest economy still had fire. shares tracked Wall Street, which fell from record highs on Friday.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS stumbled 0.3%, with South Korea's KOSPI .KS11 off 1% and Australian shares .AXJO down 0.4%.

Japan's Nikkei .N225 faltered 0.6%.

"The June payrolls number threw a spanner in the works for those participants looking for a 50 basis point cut to the federal funds rate at the upcoming FOMC meeting," ANZ analysts wrote to clients in a note.

"This was the strongest non-farm payrolls print since January this year and suggests the U.S. economy still has firm footing," they added.

"The figures also suggest that the market's pricing for a need for 'quick-fire' cuts to policy may need to be reassessed."

In reaction to the data, U.S. Treasuries sold off, sending yields on two-year notes about 10 basis points higher.

Expectations for a Fed rate cut also narrowed with the market now pricing a 27 basis points easing this month, from 33 basis points prior to payrolls. 0#FF:

Fed Chairman Jerome Powell is expected to provide further cues on the near-term outlook for monetary policy this week at his semi-annual testimony to the U.S. Congress on the economy.

The Fed in its semi-annual report to Congress on Friday repeated its pledge to "act as appropriate" to sustain economic growth. AND GEOPOLITICS

In currency markets, action was in the Turkish lira which weakened to 5.8245 per dollar, the lowest since June 25 after Turkey's central bank governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal. Tayyip Erdogan sacked Cetinkaya for refusing the government's repeated demands for rate cuts, raising questions about central bank independence.

The lira pared some of its losses to last hold near 5.7401.

The dollar index .DXY , which measures the greenback against a basket of major currencies, eased from a 2-1/2 week top of 97.443 to last quote at 97.251.

The euro EUR=D3 was flat at $1.1226, not far from a 2-1/2-week low of $1.1205 touched on Friday.

The Australian dollar AUD=D3 , which has been on an uptrend since June 18, slipped below 70 U.S. cents to last trade at $0.6974.

Geopolitics may be in focus this week following news on Sunday that Iran will boost its uranium enrichment, in breach of a cap set by a landmark 2015 nuclear deal. far U.S.-Iran tensions have not had a material impact on markets, but if tensions escalate it could be a different story," said National Australia Bank strategist Rodrigo Catril.

The latest news on the China-U.S. trade talks failed to make an impression on markets.

White House Economic advisor Larry Kudlow confirmed top representatives from the United States and China will meet in the coming week to continue trade talks. the negotiators can find a solution to the difficult structural issues that remain between the two sides is another matter, and Kudlow cautioned there was 'no timeline' to reach an agreement," NAB's Catril said.

In commodity markets, oil prices rose with Brent crude futures LCOc1 , the international benchmark for oil prices, up 9 cents at $64.32 per barrel while U.S. crude added 8 cents to $57.59.

Spot gold XAU= fell 0.2% to $1,397.03 an ounce.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets

https://tmsnrt.rs/2zpUAr4 Asia-Pacific valuations

https://tmsnrt.rs/2Dr2BQA

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Darren Schuettler)

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