Bond yields up as markets await Fed signal

Dow Jones

The Nikkei 225 increased by 0.3% in morning trade, whereas the Topix gained 0.36%.

Stock markets mostly fell on Wednesday, with investors awaiting key clues on the outlook for United States interest rates from Federal Reserve chief Jerome Powell.

The pan-region Euro Stoxx 50 futures were up 0.43 per cent, Germany's DAX futures rose 0.42 per cent and Britain's FTSE futures gained 0.33 per cent in early European trade.

The automotive sector felt much of the pressure with large-cap vehicle parts suppliers Valeo and Continental tumbling more than 2% following a slew of warnings by small-cap auto and industrial suppliers AAGG.DE . In prepared remarks to a congressional committee, Powell said the Fed stands ready to "act as appropriate" to sustain a decade-long expansion. "There is now economic evidence that the outlook for the US economy is not that great", said Juan Perez, senior currency trader at Tempus Inc in Washington.

"I don't think the monetary policy will be very affected by the recent spike in inflation", So said.

Yet the gloom seemed confined to Europe for now. Among stocks, Britain's Reckitt Benckiser was among the biggest boosts after agreeing to pay up to $1.4 billion to resolve USA federal probes in connection with the sales and marketing of an opioid addiction treatment by its former prescription drugs business Indivior.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.4%, after three sessions of losses.

In a single day stateside, the S&P 500 breached the 3,000 level for the first time, however, pared good points to close 0.5% higher at 2,993.07.

US equities rallied late to close at a record high, while Treasuries retreated after the latest American inflation reading came in hotter than anticipated.

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Fed chair Jerome Powell's latest dovish comments have removed market doubts over a U.S. interest rate cut in July. Yet, this only worked to diminish bets of a 50bps rate cut from the Fed at this month's interest rate decision.

Powell's speech on Wednesday essentially frames the July FOMC policy meeting as a decision between a 25- or 50-basis point rate cut.

Minutes from the Fed's last meeting, in mid-June, however, showed some policymakers felt there was not yet a strong case for easing.

"A rate cut in July is now all but certain", said James McCann, senior global economist at Aberdeen Standard Investments.

The dollar index.DXY, tracking the greenback against six major currencies, dropped 0.29%.

The dollar also firmed to 108.90 yen JPY= , while the euro faded to $1.1206 EUR= having been as high as $1.1412 just a couple of weeks ago. It was still some distance away from a six-month trough of 106.780 set on June 25.

West Texas Intermediate crude climbed 0.2% to $60.56 a barrel, the highest in seven weeks.Gold dipped 0.3% to $1,415.26 an ounce. Traders will be eyeing that testimony for further clues after a measure of USA consumer prices rose more than forecast in June.

In commodity markets, oil prices rose as USA crude inventories shrank more than expected and as major producers evacuated rigs in the Gulf of Mexico before a storm.

Brent crude LCOc1 futures rose 64 cents to $64.80, while US crude CLc1 gained 82 cents to $58.65 a barrel. Brent crude futures rose 30 cents to $67.31.

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