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=ASIA MARKETS: Asian Stocks Advance As Fed Rate Cut Bets Gain Ground After Powell Comments

HONG KONG (Jul 11) -- Asian shares outside of Japan advanced Thursday as Federal Reserve Chair Jerome Powell’s comments revived bets of a 50 basis-points rate cut this month.

The Nikkei Asia300 Index of companies outside Japan rose 0.9% to 1,321.33. China Petroleum & Chemical climbed 1.8%, CNOOC advanced 2.4%, and PetroChina ended 1.9% higher. SK Innovation jumped 4.2% after Brent crude yesterday had its best session in six months. Samsung Electronics climbed 1.4%, leading South Korean equities higher. The country’s ruling party on Thursday said it would include up to 300 billion won ($255 million) in an extra budget to deal with the impact of Japan’s recent export limits on high-tech materials, Reuters reported.

The probability of a 50 basis-point rate cut by the Fed at the July 30-31 meeting climbed to 1-in-3 after Powell hinted at lowering borrowing costs amid trade tensions and weak global growth. The odds of a 50 basis-point cut in the run up to Powell’s testimony had dropped near to 2% amid an upbeat U.S. jobs report and better-than-expected manufacturing data.

Powell said since the Fed’s May meeting, crosscurrents relating to trade and growth in China and Europe have reemerged and these concerns “may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data.”

ING Bank said that “Powell has virtually delivered the July rate cut already” and DBS Bank remarked that that the Fed chief “just about signed and sealed an imminent Fed cut.” Goldman Sachs increased the subjective probability of a 25 basis-points rate cut at the July meeting to 75% and of a 50 basis-point rate cut to 15%.

Minutes of the Fed’s June meeting, released after Powell’s testimony, reinforced expectations of rate cuts. The minutes revealed that policymakers “generally agreed” that risks and uncertainties surrounding the economic outlook had intensified. Many officials judged that additional policy accommodation would be warranted if they continued to weigh on the economic outlook.

U.S. equities climbed to record yesterday, the dollar index fell, and yields at the shorter-end of the Treasury curve tumbled.

In other movers on the A300 on Thursday, Taiwan Semiconductor Manufacturing added 1.2% after reporting a 22% year-on-year increase in June sales.

Samsung Heavy Industries advanced 1.1%. The company said it won an order worth 147 billion won to build two crude oil carriers.

Rate-sensitive Hong Kong property developers outperformed. Sun Hung Kai Properties rose 2.2%, Henderson Land Development climbed 1.6%, and New World Development added 1.6%.

China Railway Construction closed 0.6% higher. A consortium of its subsidiaries, including China Railway Construction Investment Group won a bid for a public-private partnership project at a bidding price of about 4.1 billion yuan ($596 million).

- By Nimesh Vora;; +852 3960 5150
- Edited by Vipin Nair
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