By Stella Qiu
SYDNEY (Reuters) – Asian stocks started cautiously on Monday after their best weekly run in five months, as investors eagerly awaited China’s rate decision and testimony from U.S. Federal Reserve Chairman Jerome Powell. for clues on the path of future rates.
S&P 500 futures rose 0.1% in early Asia, while Nasdaq futures rose 0.3%. Cash US Treasuries were not traded due to the June 16 holiday, while futures were up a fraction with little liquidity.
In Asia, the Japanese Nikkei fell 0.5%, after hitting a new three-decade high on Friday, buoyed by the Bank of Japan’s (BOJ) decision to leave its ultra-loose policy unchanged, which sent the yen at 7 months. weak against the US dollar.
MSCI’s broadest index of Asia-Pacific stocks outside Japan was down 0.1%, after hitting a four-month high on Friday and ending up 3% for the week, the best since January.
In China, market hope for a stronger stimulus is growing after cabinet met on Friday to discuss measures to boost economic growth. In addition, the People’s Bank of China is expected to significantly cut its prime interest rates on benchmark loans on Tuesday, following a similar reduction in medium-term loans last week.
Morgan Stanley’s China chief economist Robin Xing expects a stimulus package imminent as second-quarter gross domestic product (GDP) growth sits at 0%, lagging behind government target of around 5% for the year.
“This requires more policy easing to stabilize investment – the main drag on Q2 GDP growth – and prevent the weakness from spreading to household sentiment and services,” Xing said.
After a busy week at the central bank as the stock market applauded the Fed’s decision not to raise rates in June, investors are turning to a number of Fed speakers this week, with Powell set to deliver testimony in Congress on Wednesday and Thursday.
“Fed Chairman Powell is testifying in the House and Senate emphasizing whether July’s FOMC (Federal Open Market Committee) meeting is truly ‘live,’ and whether the chart in Fed points of two more hikes is a true base case based on the data or more ‘ambitious,'” said Ray Attrill, head of currency strategy at National Australia Bank.
Markets are pricing in a 70% chance the Fed will hike a quarter point in July before holding steady for the rest of the year, though officials appeared hawkish and the dot chart shows two more hikes .
The dollar index was little changed against major peers early 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 141.90 to the dollar, while the European Central Bank, which rose a quarter point last week, helped the euro move closer to a five-week high at $1.094.
Oil prices fell early Monday. U.S. crude futures fell 0.7% to 71.24 a barrel, while Brent fell 0.8% to $76.98 a barrel.
Gold prices held steady at $1,956.84 an ounce.
(Reporting by Stella Qiu; Editing by Christopher Cushing)