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Asian stocks ease from multi-year high touched last week

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Dollar loiters near 3-1/2-year lows; Euro, yen firms

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Powell reiterates wait-and-see approach to rate cuts

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Trump's tax bill passes Senate, House of Representatives

up next

(Updates to Asia late morning)

By Ankur Banerjee

SINGAPORE, July 2 (Reuters) - Asian stocks stumbled on

Wednesday and the dollar languished near 3-1/2-year lows as

investors pondered the prospect of U.S. interest rate cuts and

the scramble for trade deals ahead of President Donald Trump's

July 9 deadline for tariffs.

Trump said he was not considering extending the July 9

deadline for countries to negotiate trade deals with the United

States, and cast doubts again that an agreement could be reached

with Japan, although he expects a deal with India.

MSCI's broadest index of Asia-Pacific shares outside Japan

eased 0.23% in early trading, inching away from

the November 2021 top it touched last week. Japan's Nikkei

fell 0.78%, dragged by tech stocks.

Tech-heavy Taiwan stocks and South Korea's Kospi

Index also fell after U.S. tech firms were hit hard

following a strong rally in June.

"You've seen it with other trade negotiations that they take

years if you want to do them properly," said Matthias Scheiber,

senior portfolio manager and the head of the multi-asset

solutions team at Allspring Global Investments.

"It's not something you negotiate within a week. I think

that's also what the U.S. is realizing now. If the tariffs get

ramped up again and the situation sours, short term, we can

definitely see some volatility."

Data on Tuesday showed the U.S labour market remained

resilient with a rise in job openings for May, sharpening the

focus on the payrolls report due on Thursday as investors try to

gauge when the Federal Reserve is likely to cut rates next.

Fed Chair Jerome Powell, under fire from Trump to cut rates

immediately, reiterated that the U.S. central bank plans to

"wait and learn more" about the impact of tariffs on inflation

before lowering interest rates.

Traders are pricing in 64 basis points of cuts this year

from the Fed with the odds of a move in July at 21%.

That maintained a bearish bias on the dollar. The euro

last bought $1.1799, just below the 3-1/2-year high it

touched on Tuesday. The yen was steady at 143.52 per

dollar.

"Any disappointing economic data can prompt further dovish

repricing of FOMC rate cuts and another round of USD selling,"

said Carol Kong, a currency strategist at Commonwealth Bank of

Australia.

"The 'One Big Beautiful Bill' Act (OBBBA) and trade

developments also have the potential to further weaken the USD

if they undermine investor confidence about the U.S. economy."

TRUMP'S BILL

Investor focus over the last few days has pivoted to the

progress of Trump's massive tax-and-spending bill, which is

expected to add $3.3 trillion to the national debt. The

legislation heads to the House of Representatives for possible

final approval after U.S. Senate Republicans passed it by the

narrowest of margins.

The bill has stoked fiscal worries but the reaction was

relatively muted after it passed the Senate. The benchmark U.S.

10-year yields were steady at 4.245% having touched

a two-month low in the previous session.

Aninda Mitra, head of Asia macro strategy at BNY Investment

Institute, said the legislation solidifies a steady

deterioration of the fiscal position and the debt trajectory of

the U.S. government.

"The near-term impact is mostly in the price, but the

uncertainty factor could keep term premia elevated. We don't

think long-term yields will fall back materially in the 6-12

month horizon."

The fiscal worries, trade uncertainties and the U.S. rate

path trajectory have all led investors to flee U.S. assets and

look for alternatives. Investors worry that Trump's chaotic

trade policies could hit U.S. economic growth.

That has left the dollar unloved, with the greenback down

over 10% for the year in its worst first half performance since

the 1970s. The dollar index, which measures the U.S.

currency against six rivals, was at 96.649, near its lowest

since March 2022.

In commodities, spot gold eased to $3,332.19 per

ounce, after surging 1% in the previous session. The yellow

metal is up 27% this year on safe-haven flows.