As Fears of Aggressive Rate Cuts Fade, Asia stocks Fall

Federal Reserve (Fed) Chairman Jerome Powell has been hinting that interest rates will be cut in July due to economic risks and inflation pressures. Wall Street Journal commented on this at the end of last week by saying that the Fed is likely to cut rates by 25 bps this month and ‘may make further cuts in the future given global growth and trade uncertainties.

As worries for an aggressive rate cut have now become more settled, the Asian market reacted with a fall in Asia stock this morning, while crude oil prices rose due to increased tensions in the Middle East after Iran’s seizure of a British tanker.

According to Reuters, MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS was down 0.4 percent, Japan's Nikkei.N225 closed at 0.2 percent, the Shanghai Composite Index.SSEC was down by one percent and Hong Kong’s Hang Seng.HSI dropped by 0.9 percent.

Speaking about the week ahead, senior forex strategist at IG Securities said that stocks could go lower depend on any tweets that President Donald Trump creates about trade issues with China. “Stocks could decline if he continues to make challenging trade comments directed at China this week,” Ishikawa said.

While Asia stock fell, crude oil prices increased with Brent crude futures LCOc1 up by 1.55 percent at $63.44 per barrel, following an increase of about 0.9 percent on Friday. 

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