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Trump set to announce trade deal with Britain, media

report says

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News lift Wall Street, European stock futures

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Investors await US-China trade talks on Saturday

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Markets scale back chance of June, July Fed rate cut

By Stella Qiu

SYDNEY, May 8(Reuters) - Shares in Asia firmed on

Thursday after U.S. President Donald Trump flagged a first trade

deal in his global tariff war, while the dollar tried to hold

overnight gains as markets pushed out the chance of near-term

rate cuts.

S&P 500 futures erased earlier losses to be up

0.5% while Nasdaq futures rose 0.7%. The pan-European

STOXX 600 index climbed 0.7% and FTSE futures

gained 0.5%.

Trump said late on Wednesday that he would announce

details about a major trade deal with an unspecified country at

a press conference later in the day. The New York Times reported

that the deal was with Britain.

The president's comments came as investors anxiously await

planned trade talks between Washington and Beijing on Saturday,

which could mark the first step in resolving a potentially

damaging trade war between the world's top two economies.

Markets are also keeping their eyes peeled on the Bank

of England's policy meeting later in the day where expectations

are for a quarter-point rate cut. Additionally, central banks in

Sweden and Norway are due to deliver their latest policy

decisions, although no moves are expected.

Overnight, in a widely expected decision, the Federal

Reserve left policy rate in the 4.25%-4.5% range, but said the

risks of higher inflation and unemployment had risen. Chair

Jerome Powell said it isn't clear if the economy will continue

its steady pace of growth, or wilt under mounting uncertainty

and a possible coming spike in inflation.

Markets scaled back the chance of a June rate cut to

just 20%, from 30% a day earlier, while a move in July is now

priced at 70%, compared with a near-certainty just a week ago.

"This suggests little inclination to move until they are

confident of the direction the data is heading, meaning rate

cuts could be delayed, but risk being sharper when they come,"

said James Knightley, chief international economist at ING.

Such a scenario likely weighed on the longer-dated Treasury

yields, with the benchmark ten-year yields down 7

basis points overnight at 4.275%. Two-year yields

held steady at 3.785%.

The hawkish Fed also gave the dollar a much needed

bounce, although some selling pressure was again evident in

morning trade in Asia. The dollar index slipped 0.1% to

99.803, having rebounded 0.3% overnight against its major peers.

On Thursday, MSCI's broadest index of Asia-Pacific

shares outside Japan was flat while Japan's

Nikkei edged up 0.2%.

Both Chinese blue chips and Hong Kong's Hang Seng

gained 0.4%, building on the gains from Wednesday when

Beijing announced a rate cut and more cash for the banking

system.

Overnight on Wall Street, stocks rose on reports that the

Trump administration was planning to rescind and modify a

Biden-era rule that curbed the export of sophisticated

artificial-intelligence chips. Nvidia ( NVDA ) shares jumped 3%.

TRADE TALKS

On Wednesday, Trump suggested that Beijing initiated

upcoming senior-level trade talks and said he was not willing to

cut U.S. tariffs on Chinese goods to get Beijing to the

negotiating table.

China has said earlier that it was the U.S. side that had

signalled a desire to hold talks.

While Trump's comments underlined the recent mixed signals

from Washington on de-escalating the Sino-U.S. trade war,

analysts say the Geneva meeting could help ease tensions.

"The rest of the week will likely see investors cautiously,

if not slightly auspiciously, awaiting trade talks between the

U.S. and China," said Kyle Rodda, a senior analyst at

Capital.com.

In commodities markets, oil prices bounced after falling

more than $1 on Wednesday. U.S. crude futures rose 0.5%

to $58.34 a barrel while Brent was at $61.34 per barrel,

up 0.4% on the day.

In precious metals, gold prices rallied 0.7% to

$3,390 an ounce amid the uncertainties about Fed policy outlook,

but still short of its record high of $3,500.