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Asian markets drop as traders await Powell speech

Asian markets drop as traders await Powell speech

HONG KONG, Aug 21: Equities stuttered in Asia Wednesday as investors took a step back after recent gains, with focus now turning to a key speech by Federal Reserve boss Jerome Powell at the end of the week. Rising hopes for China-US trade talks have provided a much-needed lift to markets over the past two days but with few fresh catalysts, dealers are keeping their powder dry ahead of Friday's address. After positive signals from Donald Trump and some of his top advisers on Monday over progress in the talks with Beijing, and an olive branch with the delay of a ban on Huawei purchases, there have been few developments for traders to buy on, report AFP. "Our trade-war headline-inspired relief rally appears to have run its course as I suspect there is still a lot of nervousness among US investors as the global economic realities are just too hard to ignore," said Stephen Innes at Valour Markets. Hong Kong added 0.2 percent, Shanghai was barely moved and Tokyo ended down 0.3 percent. Sydney fell almost one percent, Singapore shed 0.3 percent and Wellington was 0.9 percent lower. Taipei finished flat and Seoul added 0.2 percent. In early trade, London rose 0.5 percent, Paris added 0.8 percent and Frankfurt was up 0.5 percent. The Fed releases minutes of its July meeting later Wednesday which will provide an insight into its deliberations when cutting interest rates for the first time since the financial crisis. But Powell's talk at the central bankers' gathering in Jackson Hole, Wyoming, is the key event and will be closely pored over for clues about the bank's plans for next month, with experts unable to agree on whether or not he will announce further cuts. There has been increased speculation that central banks and governments will step in with stimulus support to head off a global downturn, but analysts warn they could be disappointed by what Powell has to say regarding Fed action. Wall Street and Trump "are anticipating that Mr Powell will signal that the Federal Reserve is about to embark on a reinvigorated wave of easing, following its global peers", said Jeffrey Halley, OANDA senior market analyst for Asia-Pacific. "The US data of late simply does not support the need for an aggressive easing cycle. Despite the US-China trade tensions making their presence felt in European and Asian data prints, this has simply not happened with the United States to any significant degree." Also, Trump on Tuesday insisted the economy was doing well, denying warnings from some quarters - including top economists - that the US was heading for a recession within two years. "I think the word recession is inappropriate," he told reporters at the White House. "We're very far from recession." On currency markets, the euro was struggling against the dollar as a political crisis in Italy - the eurozone's number three economy - offset hopes that Germany's government would unveil measures to avert a downturn. Italian Prime Minister Giuseppe Conte resigned and hit out at far-right Interior Minister Matteo Salvini for pursuing his own interests by bringing an end to the government coalition. President Sergio Mattarella must now decide to form a new coalition or call an election, throwing up more uncertainty and another possible budget standoff with the European Union. However, the single currency and the dollar were well up against the pound as Britain's exit from the EU without a divorce deal grows increasingly likely. Oil prices extended gains as data showing a drop in US stockpiles indicated improving demand for the commodity. Both main contracts have risen about five percent over the past week, with support also coming from trade talks hopes. Tokyo - Nikkei 225: DOWN 0.3 percent at 20,618.57 (close) Hong Kong - Hang Seng: UP 0.2 percent at 26,270.04 (close) Shanghai - Composite: FLAT at 2,880.33 (close) London - FTSE 100: UP 0.5 percent at 7,159.33 Euro/dollar: DOWN at $1.1095 from $1.1097 at 2040 GMT Pound/dollar: DOWN at $1.2136 from $1.2166 Euro/pound: UP at 91.42 pence from 91.20 pence Dollar/yen: UP at 106.50 yen from 106.23 yen West Texas Intermediate: UP 15 cents at $56.28 per barrel (new contract) Brent North Sea crude: UP 34 cents at $60.37 per barrel New York - Dow: DOWN 0.7 percent at 25,962.44 (close) Trading floors have been tense for several weeks owing to concerns about a number of factors including the trade war, Brexit, a global economic slowdown and tensions in the Middle East. However, while markets remain on edge, equities have enjoyed a positive start to the week, with Germany reportedly planning government support to avert a recession in Europe's biggest economy and central banks elsewhere looking to ease monetary policy. Among the key events this week is a speech by Federal Reserve boss Jerome Powell at the annual Jackson Hole symposium of central bankers in Wyoming. His remarks will be pored over to see if he hints at another interest rate cut following last month's move, and if so how deep it will be. However, some analysts have pointed out that while the US economy is showing signs of slowing, it remains healthy and Powell could decide no new help is needed just yet. The Fed policy board "did not unanimously agree to the last 0.25 percent cut", said Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA. "US economic data continues to perform blissfully, implying the economy is doing just fine," he said. "Against that backdrop, I struggle to see why… Powell would hit the panic button at Jackson Hole this week. The financial markets could be setting themselves up for an ugly correction into the week's end." A report in The Washington Post said top officials are considering measures to head off a US downturn, including temporarily cutting the payroll tax to increase workers' monthly take-home pay. Another move being looked at is reversing new tariffs imposed on Chinese goods, The New York Times reported. Tokyo ended up 0.6 percent, while Sydney, Seoul and Wellington each jumped around percent. Taipei and Jakarta were also higher. But Hong Kong slipped 0.2 percent on profit-taking after a four-day rally, while Shanghai ended 0.1 percent lower. Manila, Mumbai and Bangkok were also lower. In early trade, London edged up 0.1 percent but Paris and Frankfurt each slipped 0.2 percent. The White House's decision to delay again by 90 days a ban on US firms doing business with Huawei was taken as a conciliatory move towards China and provided hope. The announcement followed comments from Donald Trump and key advisers expressing optimism over the talks, with top-level negotiations between the economic titans lined up for next month. The news was tempered, however, by the Commerce Department adding 46 companies to its list of Huawei subsidiaries and affiliates that would be covered by the ban if it is implemented in full, taking the total on the list to more than 100. The "details don't necessarily suggest the US is making too many concessions on the China trade negotiations", said Rodrigo Catril, senior forex strategist at National Australia Bank. Oil prices were rose, building on Monday's strong gains - when Brent jumped 1.9 percent and WTI 2.4 percent - on hopes for the trade talks and stimulus and following a strike by Yemeni rebels on a Saudi Arabian oil field at the weekend.

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