By Rae Wee and Sameer Manekar

SINGAPORE (Reuters) - Asian stocks edged marginally lower on Wednesday after Federal Reserve Chair Jerome Powell offered little hints on the timing of U.S. rate cuts expected later this year, even as he signalled greater confidence that inflation was coming to heel.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.27% in early Asia trade, losing some steam after surging to an over two-year high at the start of the week.

In New Zealand, the kiwi rose 0.05% to $0.6128 ahead of a rate decision by the country's central bank later in the day, where focus will be on any guidance for its rate outlook.

Expectations are for the Reserve Bank of New Zealand (RBNZ) to maintain its hawkish bias at the conclusion of its monetary policy meeting, with bets for the central bank to cut rates just once before year-end.

"I think the RBNZ should be easing sooner - a lot sooner than what they expect," said Jarrod Kerr, chief economist at Kiwibank.

"I think we've seen enough in the local data to expect inflation to fall back to 2%... we think they should be cutting in August but they probably will start cutting in November."

Stocks have rallied globally on the back of growing expectations of a Fed easing cycle likely to commence in September, with Powell saying on Tuesday that the U.S. is "no longer an overheated economy".

However, Powell provided little clues on how soon those rate cuts could come.

"He suggested that the Fed's reaction function is shifting to an easing bias given the significantly cooling labour market, but he nonetheless declined to offer a clear timeline on rate cuts," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

"In any event, the market has been pricing in almost two full Fed rate cuts this year, and Powell's statements didn't shift those expectations much."

Japan's Nikkei rose 0.08%, helped by a weaker yen which last stood at 161.47 per dollar.

Data on Wednesday showed Japan's wholesale inflation accelerated in June as the yen's declines pushed up the cost of raw material imports, keeping alive market expectations for a near-term interest rate hike by the central bank.

The Bank of Japan said on Tuesday that some market players called on the central bank to slow its bond buying to roughly half the current pace under a scheduled tapering plan due this month.

In other currencies, the dollar held broadly steady, with sterling little changed at $1.2787 while the euro dipped 0.01% to $1.0813.

Oil prices rebounded following three days of declines after an industry report showed U.S. crude and fuel stockpiles fell last week, indicating steady demand, and as the outlook for interest rate cuts improved. [O/R]

Brent futures rose 0.24% to $84.86 a barrel, while U.S. West Texas Intermediate (WTI) crude ticked 0.29% higher to $81.65 per barrel.

Gold gained 0.07% to $2,365.09 an ounce. [GOL/]

(Reuters) - The S&P 500 and Nasdaq notched record-high closes on Tuesday, fueled by gains in Nvidia (NASDAQ:NVDA) after U.S. Federal Reserve Chair Jerome Powell told lawmakers that more "good" economic data would strengthen the case for rate cuts. 

AI chipmaker Nvidia climbed 2.5%, offsetting declines in other chip stocks.

Microsoft (NASDAQ:MSFT) dipped 1.4%, while Tesla (NASDAQ:TSLA) added 3.7%, bringing its gain in 2024 to 5%.

It was the Nasdaq's sixth straight record-high close and the S&P 500's fifth straight as optimism about the growth of AI across the U.S. corporate landscape offset uncertainty around the Fed's rate-cut path. 

In testimony before Congress, Powell said that while inflation "remains above" the 2% soft-landing target, it has been improving in recent months and "more good data would strengthen" the case for interest-rate cuts.

However, the central bank chief insisted he was not "sending any signals about the timing of any future actions."

Markets have stuck to pricing in 50 basis points of easing for the year, seeing a nearly 72% chance for a 25 bps cut by the Fed's September meeting, according to CME's FedWatch. Those bets were at under 50% a month ago.

"The U.S. economy, and currently the U.S. labor market, have been surprisingly resilient through the course of 2024 and our base case is that a recession is not the highest probability outcome, but rather we should continue to expect moderate growth through the balance of this year and into next," said Bill Northey, senior investment director at U.S. Bank Wealth Management.

Inflation data is also due this week, including Thursday's consumer price index and the producer price index reading on Friday.

Shares of JPMorgan and Wells Fargo climbed over 1% and Citi rose 2.8%. The three banks will release quarterly results on Friday, marking the start of second-quarter earnings season.

Reuters reported that the Fed was considering a rule change that could save big banks billions of dollars in capital.

Analysts on average see S&P 500 companies increasing their aggregate earnings per share by 10.1% in the second quarter, up from an 8.2% increase in the first quarter, according to LSEG I/B/E/S data.     

The S&P 500 climbed 0.07% to end the session at 5,576.98 points.

The Nasdaq gained 0.14% to 18,429.29 points, while the Dow Jones Industrial Average declined 0.13% to 39,291.97 points.

Even as the S&P 500 rose, declining stocks outnumbered rising ones within the index by a 1.5-to-one ratio.

Tempus AI rose almost 4% after JPMorgan, Morgan Stanley and other brokerages initiated coverage of the stock with bullish ratings. The genetics testing firm, which receives "immaterial" revenue from its AI business, is down around 7% from the $37 price set in its June IPO. 

Volume on U.S. exchanges was relatively light, with 9.6 billion shares traded, compared with an average of 11.6 billion shares over the previous 20 sessions. (This story has been refiled to add a dropped letter in the advisory line)

By Yoruk Bahceli and Samuel Indyk

(Reuters) -A shock election win for France's leftist alliance has reinforced wariness among investors who had already braced for the risk of political deadlock and a policy paralysis that's unlikely to improve the country's creaking public finances.

The left-wing New Popular Front (NFP) alliance won the most seats in Sunday's election, but fell far short of an absolute majority, a big surprise after Marine Le Pen's far-right National Rally (RN) led opinion polls.

France, at the centre of the euro project and the bloc's second biggest economy, still faces a hung parliament and taxing negotiations to form a government as markets had already anticipated - just with the left in pole position, rather than the far-right.

The risk premium, or spread, for holding France's debt over Germany's was at 65 basis points on Monday, a touch lower from Friday. It remains below the 12-year high hit in June at 85 bps.

Still, that gap is not expected to tighten again rapidly with concern fixed on what France's new political climate means for its stretched public finances that have left it facing European Union disciplinary measures.

Debt stood at 110.6% of output in 2023.

"For any budget to be passed in the new assembly, probably at the margin some fiscal loosening is required to get a compromise," said Kevin Zhao, head of global sovereign and currency at UBS Asset Management, which manages $1.7 trillion in assets.

Market relief proved tentative on Monday. France's main CAC 40 stocks index, down 3.7% since Macron called the election, rose as much as 0.8% on Monday then gave up all its gain.

Shares in France's three biggest lenders - BNP Paribas (OTC:BNPQY), Societe Generale (OTC:SCGLY) and Credit Agricole (OTC:CRARY) - which have dropped as much as 9.8% since June 9, also reversed earlier gains and were down 0.4%-1.2% at 1418 GMT.

Banks had been hard hit in the run-up to the vote on concerns that higher political uncertainty would translate into increased economic risks and fears of possible windfall taxes.

With the left more than 100 seats short of an absolute majority and President Emmanuel Macron's centrist grouping in second place, a hung parliament was still seen as the best outcome for investors in French assets, with it expected to limit the left's spending plans and avert a potential budget-driven market crisis.

The NFP's plans include scrapping Macron's pension reform raising the minimum wage and capping the prices of key goods.

It says the costs of its program would be offset by measures including tax increases.

But some investors had deemed an NFP absolute majority a bigger threat to markets than the RN, as the left alliance has said it doesn't plan to reduce France's high budget deficit.

"When you look at the composition of the parliament, the bar for the far-left to start doing anything market unfriendly is very, very high," said Gabriele Foa, portfolio manager at Algebris Investments, noting that the more moderate Socialists won a sizable share of the NFP seats.

Possibilities for a new government include the NFP forming a minority government, Macron peeling off Socialists and Greens from the NFP to isolate Jean-Luc Melenchon's far-left France Unbowed for a coalition with his own bloc, or a technocratic government.

By David Randall

NEW YORK (Reuters) - A decline of 10% in the benchmark S&P 500 stock index before the U.S. presidential election in November is "highly likely," Morgan Stanley Chief Investment Officer Mike Wilson said in an interview on Monday with Bloomberg TV.

Among the reasons for a decline are uncertainty over how swiftly the Federal Reserve will bring interest rates down from nearly two-decade highs and falling pricing power on the part of companies, increasing the likelihood of disappointing earnings results, he said.

"The average company has not had good earnings results," he said, adding that a nearly 17% gain in the S&P 500 for the year to date has been powered by a small number of companies.

At the same time, price to earnings multiples have been rising. "Valuations to me look very unexciting," he said.

Wilson maintained a bearish outlook for the majority of this year, one of few prominent forecasters to do so. In late May, he lifted his base-case 12-month forecast for the S&P500, an estimate of what the fair value of the index will be in a year, to 5,400 points. At the time, that was only 2% above its level but 20% higher than his previous forecast of 4,500.

The S&P 500 closed Monday at 5,572, some 3% above Wilson's 12-month target price.

By Kevin Buckland

TOKYO (Reuters) - The U.S. dollar hung near a multi-week low versus major peers on Tuesday, still smarting from Friday's unexpectedly soft jobs report as traders awaited testimony from Federal Reserve Chair Jerome Powell for clues on the path of interest rates.

The euro held its ground after Monday's sharp swings as investors come to terms with a hung parliament in France, which points to potential political gridlock but removes many fiscal concerns stemming from far-right or leftist victories.

The U.S. dollar index, which measures the currency against the euro, sterling, yen and three other major peers, was flat at 104.99 in early Asian hours, sticking close to the overnight low of 104.80, a 3 1/2-week trough.

The index slumped 0.9% last week, exacerbated by Friday's monthly payrolls report, which boosted bets for the Fed to soon start cutting rates.

Traders currently set about 76% odds for a rate cut at the September meeting, up from 66% a week ago, according to the CME Group's (NASDAQ:CME) FedWatch Tool. Another cut is expected by December.

Chair Powell gives two days of testimony before Congress, beginning later on Tuesday with the Senate and followed by the House on Wednesday.

Consumer price data on Thursday could also be crucial, market watchers said, with recent numbers showing a cooling from unexpectedly high levels at the start of the year.

"All ears will be on how Powell communicates the risks between stubborn inflation and unnecessary labour market deterioration," said Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY), who expects the U.S. dollar to decline over the longer term.

Meanwhile, markets have taken "a fairly sanguine view" of the French poll results, Attrill added, "viewing political gridlock - and with that a high degree of fiscal policy inertia - as the most likely way forward for France, a more benign scenario than any of the alternatives."

The euro was little changed at $1.0827, sitting not far from Monday's nearly four-week peak of $1.0845. The single currency also dipped as low as $1.07915 that same day.

Sterling traded flat at $1.28085, after rising as high as $1.28455 on Monday, its strongest since June 12.

The yen was steady at 160.91 per dollar, finding some equilibrium this week after rebounding from Wednesday's nearly 38-year trough of 161.96.

By Andy Bruce

(Reuters) - British consumer spending contracted in June, hurt by bad weather, according to surveys on Tuesday that added to recent signs of the country's tepid economic growth that the new Labour government has promised to boost.

Barclays said spending on its credit and debit cards fell by 0.6% in annual terms in June - the first drop since February 2021. It linked the fall to cool weather at the start of month.

"Once again, our data demonstrates the undeniable impact that unseasonable weather can have on consumer spending," Karen Johnson, Head of Retail at Barclays, said.

"The sluggish demand at the start of June even caused some fashion brands to adjust their sales schedules, although I was pleased to see that the situation has since improved with the arrival of sunnier days."

Similarly, the British Retail Consortium cited chilly weather as it reported a 0.2% drop in sales values in June compared with a year earlier, after a 0.7% rise in May.

The readings chimed with other signs of slowing growth, including business surveys, after the economy rebounded in the first quarter from a recession in the second half of 2023.

Improving economic growth is the top priority of new Prime Minister Keir Starmer whose Labour Party swept to a landslide victory in parliamentary elections on July 4.

Barclays said spending at supermarkets fell for the first time in two years last month but there were reasons for optimism.

"While June’s data suggests a weak month, the view looking ahead to the second half of the year, as we see it, is one of falling interest rates, growing real incomes, and increasing confidence among consumers to spend and businesses to invest," said Barclays' chief UK economist Jack Meaning.

Accountants KPMG, sponsor of the BRC's retail sales survey, said the economic environment was improving but said many retailers were still struggling.

Retail sales volumes, excluding petrol, remain slightly below their pre-pandemic level, according to official data.

By Noel Randewich and Ankika Biswas

(Reuters) -The S&P 500 and Nasdaq notched record-high closes on Monday as investors awaited fresh inflation data, commentary from Federal Reserve Chair Jerome Powell and the start of quarterly earnings season.

Nvidia (NASDAQ:NVDA) rose nearly 2%, Intel (NASDAQ:INTC) rallied over 6% and Advanced Micro Devices (NASDAQ:AMD) added 4%, lifting the Philadelphia semiconductor index 1.9%.

Traders will scrutinize consumer price data due on Thursday and producer price data expected on Friday to gauge the Fed's progress in fighting inflation.

Investors worry that waiting too long to cut interest rates could damage the labor market and push the economy into a recession. They will closely monitor Powell's semiannual testimony before U.S. Senate and House committees on Tuesday and Wednesday.

"What investors want to hear is a dovish tone and an acknowledgement that the two-sided risks are more evenly balanced today, in particular, with respect to the labor market," said Ross Mayfield, an investment strategy analyst at Baird.

Expectations for interest rate cuts as early as September grew after Friday's nonfarm payrolls report showed U.S. job growth slowed in June - the latest data to point to weakness in labor market conditions.

Traders now see a greater than 75% chance of a rate cut of at least 25 basis points by September, up from last week's 60%, according to CME's FedWatch.

Citigroup, JPMorgan Chase (NYSE:JPM) and Wells Fargo are slated to kick off Wall Street's second-quarter earnings season on Friday. Citigroup shares gained 1.1%, while Wells Fargo lost 1%.
 

Analysts on average see S&P 500 companies increasing their aggregate earnings per share by 10.1% in the second quarter, up from an 8.2% increase in the first quarter, according to LSEG I/B/E/S.

The S&P 500 climbed 0.10% to end the session at 5,572.85 points.

The Nasdaq gained 0.28% to 18,403.74 points, while the Dow Jones Industrial Average declined 0.08% to 39,344.79 points.

It was the Nasdaq's fifth straight record-high close and the S&P 500's fourth straight.

Of the 11 S&P 500 sector indexes, six declined, led lower by communication services, down 1.01%, followed by a 0.59% loss in energy.

Paramount Global fell 5.3% after it agreed on Sunday to merge with Skydance Media, scripting a new chapter for one of Hollywood's oldest studios.

Boeing (NYSE:BA) gained 0.55% after the planemaker agreed to plead guilty to a criminal fraud conspiracy charge and pay a fine of $243.6 million to resolve a U.S. Justice Department investigation into two fatal 737 MAX crashes.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.3-to-one ratio.

Volume on U.S. exchanges was relatively light, with 10.1 billion shares traded, compared with an average of 11.6 billion shares over the previous 20 sessions.

By Harry Robertson, Alun John and Dhara Ranasinghe

LONDON (Reuters) -French shares and bond prices turned higher in early trading on Monday after initial falls as investors digested elections which left France facing a hung parliament and the prospect of taxing negotiations to form a government.

A surprise left-wing surge in Sunday's election blocked Marine Le Pen's quest to bring the far right to power in the National Assembly but no single group secured a working majority.

That meant French assets traded choppily at the open as traders struggled to process relief at the absence of a far right victory, concern about a more powerful left, and uncertainty about who will eventually form a government.

France's blue-chip CAC40 share index was last up 0.4%, reversing an earlier fall, though still down around 4% since the election was called in early June.

Societe Generale (OTC:SCGLY) and BNP Paribas (OTC:BNPQY) which had opened down around 1%, were last a touch higher.

Bond markets too were uncertain how to price the outcome and the gap between Germany and France's 10 year bond yields widened to as much as 71.1 basis points but was last a touch narrower at 66.5 bps.

That spread reflects the premium investors demand to hold French debt rather than euro zone benchmark Bunds. It widened to above 80 basis points in the build-up to the election, its highest since the euro zone crisis in 2012, as investors feared a far-right majority that could implement high spending policies.

Opinion polls had forecast Marine Le Pen's far-right National Rally (RN) would be the largest party, but the election leaves France's 577-seat assembly divided in three big groups - the left, centrists, and the far right - with hugely different platforms and no tradition at all of working together.

"It's going to be very hard to actually go ahead and pass any policy and bring about any progressive reforms because each party's vote is split and no one has an absolute majority," said Aneeka Gupta, director of macroeconomic research at WisdomTree.

She added, however: "I think the markets will be happy we're avoiding this extreme situation with the far right."

Investors also have concerns that the left's plans could unwind many of President Emmanuel Macron's pro-market reforms and believe a gridlock could end attempts to rein in France's debt, which stood at 110.6% of gross domestic product in 2023.

The euro steadied after an initial fall against both the dollar and the pound and was at $1.0835 and 84.58 pence, respectively.

"It looks like the anti-far right parties really got a lot of support," said Simon Harvey, head of FX analysis at Monex Europe.

"But fundamentally from a market perspective, there's no difference in terms of the outcome. There's really going to be a vacuum when it comes to France's legislative ability."

NEXT PRIME MINISTER?

Markets' focus now turns to who will be France's next prime minister.

Current Prime Minister Gabriel Attal said he would tender his resignation, but it was not clear whether the president would accept it immediately, given the daunting task ahead to form a government.

Economists at Nomura said they expected a centrist technocratic premier to eventually be installed, and when this happens and "political uncertainty subsides, we would expect OAT-Bund spreads to tighten again."

They said a Prime Minister from left bloc - the New Popular Front - would be "the most adverse outcome for financial markets."

Parties from the NFP - made up of the French Communist Party, hard-left France Unbowed, the Greens and the Socialist Party - met overnight for first talks on how to proceed.

The bloc has no leader, and its parties are deeply divided over who they could select as a suitable premier, though investors remain nervous.

"The economic programme of the left is in many ways much more problematic than that of the right, and while the left will not be able to govern on their own, the outlook for French public finances deteriorates further with these results," said Nordea's chief market analyst, Jan von Gerich.

By Maria Martinez

(Reuters) -German exports fell more than expected in May, due to weak demand from China, the U.S and European countries, data from the federal statistics office showed on Monday.

Exports fell by 3.6% in May compared with the previous month, compared with the 1.9% decrease forecast by analysts in a Reuters poll.

The foreign trade balance showed a surplus of 24.9 billion euros ($26.94 billion) in May, following 22.2 billion euros in April and 16.8 billion euros in May of the previous year.

Exports to EU countries dropped by 2.5% in May on the month and exports to countries outside the EU declined by 4.9%, the statistics office reported.

($1 = 0.9243 euros)

By Lewis Jackson and Lucy Craymer

BRISBANE (Reuters) -U.S. and Australian officials said on Monday they were committed to improving financial connectivity in the Pacific, as lenders and policymakers from across the region met to discuss bolstering banking services amid increasing interest from China.

Pacific Island countries are facing challenges as Western banks end long-term relationships with their counterparts in small nations in the region and others look to close operations, limiting access to U.S. dollar-denominated bank accounts.

Australian Assistant Treasurer Stephen Jones said Canberra wanted to be the partner of choice in the Pacific, whether in banking or defence.

"We would be concerned if there were nations operating within the region whose principle objective was advancing their own national interest as opposed to the interests of the pacific island nations," Jones said on the first day of the two-day Pacific Banking Forum in Brisbane, when asked about Chinese banks stepping into the vacuum.

He declined to say whether China fit that description. Australia and the U.S. are co-hosting the forum.

Washington has also boosted efforts to support Pacific Island countries to curb China's influence.

"We recognise the economic and strategic significance of the Pacific region, and we are committed to deepening our engagement and collaboration with our allies and partners to bolster financial connectivity, investment, and integration," said U.S. Treasury Undersecretary Brian Nelson, who is responsible the department’s terrorism and financial intelligence office.

Western banks are de-risking to meet financial regulations, which has made it harder to do business in Pacific Island nations, in turn undermining financial resilience in these countries, according to experts.

Neither the U.S. nor Australia have yet to make detailed announcements at the forum, much of which is closed to media, but their comments come as Western nations who have traditionally held sway in the Pacific grow increasingly concerned about China's regional influence.

Beijing has signed key defence, trade and financial deals in the region. Bank of China has opened offices across the region and signed an agreement with Nauru to explore opportunities there earlier this year after an Australian bank said it would pull out of the country.

Nelson told those attending the meeting that the U.S. recognised and is committed to addressing bank de-risking across the Pacific.

"There is a lot to be gained by promoting financial integration around the world," he added. "But conversely, when correspondent banking relationships dwindle, the consequences can be substantial."

Nelson said over the past decade correspondent banking relationships in the Pacific had declined at twice the rate of the global average. The World Bank and Asia Development Bank is working on programmes to improve corresponding banking relations.

U.S. Treasury Secretary Janet Yellen said in a virtual address to the meeting that Washington's focus was on supporting the Pacific's economic resilience, including through strengthening access to correspondent banks.

"The United States is committed to an Indo-Pacific that is free and open, connected, prosperous, secure, and resilient. A strong and connected Pacific region has benefits for the United States and for the global economy," she said.