Asia cautious as everything rides on dovish Powell

Wall Street falls on Apple-led technology slump and fading hopes of aggressive US rate cut

Wall Street falls on Apple-led technology slump and fading hopes of aggressive US rate cut

An upbeat jobs report on Friday helped the greenback, leading traders to revise their assumptions as to how much the central bank might cut rates.

On Wall Street, the S&P 500 lost 0.5% while the Nasdaq Composite dropped 0.8%, led by fall in Apple after a brokerage downgraded the stock to "sell".

"The Fed's consideration of rate cuts is not only about growth but also about inflation, which remains well below target, and inflation expectations, which were breaking to the downside before the Fed signaled the likelihood of cuts".

The question is whether the Fed will still see a good argument for cutting interest rates after the strong U.S. June jobs data.

In the long run, however, hopes of better relations between the United States and the rest of the world could dampen appetite for the dollar, given the greenback has benefited from safe-haven flows, as could rising expectations of slower USA economic growth.

European stock markets were set to follow Asia and US markets lower.

Powell and James Bullard, who was the only dissenting vote in favour of a rate cut at the Fed's meeting in June, are scheduled to address events this week, potentially providing some clue on the policy makers' next move.

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The job openings rate was 4.6 percent, down from the 4.7 percent in April.

Those were tempered by a United States labor report on Friday that showed nonfarm payrolls jumped 224,000 in June, beating forecasts of 160,000, a sign that the world's largest economy still had some fire. However, Hollenhorst noted that the further slowdown in the forward-looking ISM manufacturing index increases the chance of a cut in July or later this year. The index represents the share of businesses that expanded activity during the month. He began openly criticizing the central bank and its chief in 2018.

"The re-adjustment in expectations did push the dollar higher and had a negative effect on Asia but Europe has been supported by investors saying "whatever the Fed does, the ECB (European Central Bank) will still cut", said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

Investors have been mostly pausing ahead of the two days of congressional testimony from Federal Reserve Chair Jerome Powell. Last year, Fed officials raised rates four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled.

Kudlow reiterated his call for the Fed to "take back" its interest rate hike in December.

The president has said he believes he has the authority to replace Powell as Fed chairman but has said he doesn't plan to do it.

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