SINGAPORE- Asian stocks rose on Wednesday as comments from Federal Reserve Chair Jerome Powell reinforced expectations that US rate cuts were not far off, while the yen struggled at levels last seen in 1986, keeping traders wary of Japanese intervention.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.64 percent higher, boosted by tech stocks, while Japan’s Nikkei jumped 1.4 percent , stalking the record high touched in March.
Futures indicated European bourses were due to open higher with Eurostoxx 50 futures up 0.5 percent and German DAX futures up 0.34 percent . The focus was on France’s political landscape ahead of Sunday runoff election.
The US is back on a “disinflationary path”, Powell said on Tuesday, although he cautioned that policymakers need more data before they can consider cutting interest rates.
Powell’s comments sent US Treasury yields 4.3 basis points lower overnight, with the yield on the 10-year note steady at 4.435 percent in Asian hours on Wednesday, keeping the dollar subdued.
“I thought Powell was pretty balanced — the US is on the right path, but more data is needed,” said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.
“My interpretation is that cuts are likely this year, with September the probable starting point because there will be new economic forecasts at that meeting.”
Traders are currently pricing in a 69 percent chance of the Fed cutting rates in September and as many as two rate cuts this year, a far cry from the more than 150 basis points of easing expected at the start of the year.
Investors were also weighing data showing a tight US labor market and will switch their focus to Friday’s nonfarm payrolls data, with US markets shut on Thursday and closing early on Wednesday.
Minutes of the Fed’s last meeting are due later in the day and will offer more clues to its thinking on rates outlook.
The prospect of a US rate cut coming soon has kept a lid on the dollar’s ascent, with the dollar index which measures the US unit against six rivals, steady at 105.74.
