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Fed's Powell signals cautious approach to further rate

cuts

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Global stocks, currency markets tentative after Fed cut,

assess

future easing

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Bank of Canada cuts rates; NZ and Australia stocks falter

By Gregor Stuart Hunter

SINGAPORE, Sept 18 (Reuters) - Global stock markets

steadied on Thursday after the Federal Reserve cut interest

rates but investors were circumspect after the world's biggest

central bank signalled a measured approach to further monetary

policy easing.

U.S. equity futures advanced 0.3%, after a uneven

session on Wall Street overnight, while shares in Korea

and Taiwan led gains in Asia, both opening around 0.7%

higher. Japan's Nikkei 225 tacked on 0.3%.

The gains steadied MSCI's broadest index of Asia-Pacific

shares outside Japan, which edged 0.1% lower, as

declines in Australian and New Zealand markets weighed on the

wider benchmark.

Global stocks stumbled on Wednesday after hitting a record

high in the wake of the Fed's quarter point rate cut and

indications it will steadily lower borrowing costs for the rest

of this year.

However, in post-meeting comments Fed Chair Jerome Powell

tempered the more aggressive easing expectations in markets,

saying Wednesday's move was a risk-management cut and that the

central bank does not need to move quickly on rates.

"All told, we'd describe the decision and tone of the press

conference as balanced and restrained, and not at all dovish,"

ANZ analysts said in a note.

"Powell's focus on stronger U.S. GDP forecasts and still

elevated inflation projections seemed to create doubt in

investors' minds."

Those doubts fed into the U.S. trading overnight, with the

S&P 500 and the Nasdaq Composite closing down.

Only new Governor Stephen Miran, who joined the Fed on Tuesday,

dissented in favor of a larger 50-bp cut.

Currency markets were similarly indecisive.

The U.S. dollar index dropped to the lowest since

February 2022 at 96.224 against a basket of major peers

immediately after the rate decision, but sprang back to be

higher on the day at 97.074.

The euro was steady at $1.1821 after a knee-jerk

reaction to the Fed announcement saw it rise to the highest

since June 2021 at $1.19185.

Sterling was flat at $1.3626 having briefly raced

to the highest since July 2 at $1.3726 on Wednesday.

The Bank of England announces its own policy decision later

on Thursday, and is widely anticipated to keep rates at 4%.

Traders are pricing in a 87.7% chance of another 25-bp cut

at the Fed's next meeting in October, compared to a 74.3%

probability a day earlier, according to the CME Group's FedWatch

tool.

"The Fed is still signalling more rate cuts, but at the same

time still sees okay growth, which is a positive combination for

share markets," said Shane Oliver, chief economist and head of

investment strategy at AMP in Sydney. "I do think the gains will

be a bit limited though, as markets have already had a big rally

in anticipation of the Fed cutting and so are due a pause or

near-term correction," he added.

The Bank of Canada also reduced its key policy rate by

25-bp to a three-year low of 2.5% on Wednesday, the first cut in

six months, and said it would be ready to cut again if risks to

the economy increased in coming months.

In New Zealand, the S&P/NZX 50 dropped 0.6% after data

showed a worse-than-expected economic contraction in the second

quarter. The kiwi dollar sank 0.6% against the

greenback.

Australia's market fared no better, falling 0.8% led

by a decline of as much as 13.6% in gas producer Santos

shares after a consortium led by Abu Dhabi's ADNOC scrapped its

$18.7 billion bid for the company, saying commercial terms could

not be agreed.

In the bond market, the yield on benchmark 10-year Treasury

notes ticked up to 4.0872% compared with its U.S.

close of 4.076% on Wednesday. The two-year yield,

which rises with traders' expectations of higher Fed funds

rates, rose a touch to 3.5552%.

Gold prices rose 0.3% to $3670.19 per ounce,

recovering from a dip after hitting a record high on Wednesday.

Oil prices were steady, with Brent crude last

trading at $67.95 per barrel.