Asian stocks dip as Fed pushes back on aggressive rate cut views

Asian equities report losses as Fed tempers rate cut expectations.
Caution ahead of the G-20 summit could cap upside in stocks, if any.

Asia stocks are on the defensive this Wednesday morning in Asia as the US Federal Reserve (Fed) tempered expectations for aggressive cuts in borrowing costs.

As of writing, Japan’s Nikkei is reporting 0.39% losses and Australia’s S&P/ASX 200 is shedding 0.11%. Stocks in China, Hong Kong and South Korea are also flashing moderate losses.

The US stocks fell in the overnight trade with the Dow Jones Industrial Average (DJIA) falling by 179 points, the biggest one-day loss since May 31.

The equities came under pressure as the Fed’s Bullard said the current economic conditions do not warrant a 50 basis point rate cut in interest rates in July. Further, Chairman Powell said the US central bank is assessing whether current economic conditions call for cut in borrowing costs and further added that the Fed is “insulated from short-term political interests.”

It is worth noting that President Trump recently criticized Powell by calling hum a stubborn child for refusing to cut rates.

The Fed removed the word patience form its forward guidance last week. The markets took it as a sign of the Fed laying groundwork for a cut in interest rates. However, Powell’s latest comments indicate the central bank is still on a wait and watch mode.

The markets may continue to trade flat-to-negative for the rest of the week on account of caution ahead of the G-20 summit in Japan this weekend.

President Trump and his Chinese counterpart Xi Jinping are scheduled to meet on the sidelines of the G-20 meeting.

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