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Asian stocks rally, European futures jump

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Dollar under pressure, set for weekly loss

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Eyes on U.S. PCE price index data

By Rae Wee

SINGAPORE, June 27 (Reuters) - Asia shares hit their

highest level in more than three years on Friday as they tracked

a Wall Street rally, though the dollar struggled on concerns

about the Federal Reserve's independence and expectations for

early rate cuts.

Stock indexes worldwide look set to end the week on a

positive note, with worries about tensions in the Middle East

and uncertainty over tariffs and trade deals on the backburner

for now.

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

touched its strongest level since November 2021

early in the session. It last traded 0.2% higher and is set to

clock a 3% gain for the week.

Japan's Nikkei jumped 1.5% and surpassed the 40,000

mark for the first time in five months.

Reasons for the upbeat mood included news that Washington

has reached an agreement with Beijing on how to expedite rare

earth shipments to the United States.

U.S. Treasury Secretary Scott Bessent also said on Thursday

that he has asked Republicans in Congress to scrap the Section

899 retaliatory tax proposal from their tax and spending bill

after Washington reached an agreement with Group of Seven

industrial countries.

"That was something that had been making some investors,

especially foreign investors, nervous when that provision was

passed by the House. So if that provision gets removed, then

that allays one of the concerns from foreign investors," said

Khoon Goh, head of Asia research at ANZ.

"The cumuluation of these various... positive developments

all helped to contribute to the buoyant market mood we're

seeing."

European futures also gained, with EUROSTOXX 50 futures

and DAX futures both up 0.6%, while FTSE

futures advanced 0.16%.

U.S. stock futures were little changed, though Wall Street

had on Thursday closed near record highs, further supported by

expectations of imminent Fed rate cuts.

FED CUTS COMING

Much of the focus for markets over the past two sessions has

been on the prospect of an early change of guard at the Fed,

after the Wall Street Journal reported that U.S. President

Donald Trump has toyed with the idea of selecting and announcing

Fed Chair Jerome Powell's replacement by September or October.

That knocked an already battered dollar even lower as

traders fretted about an erosion of Fed independence and as they

moved to price in more U.S. rate cuts this year.

The dollar languished near a 3-1/2-year low on Friday

and was headed for a 1.4% weekly loss, its largest decline in

over a month.

For the year, the greenback is already down more than 10%

and if it stays that way in the next few days, that will mark

its biggest first half-of-a-year fall since the start of the era

of free-floating currencies in the early 1970s.

Against a weaker dollar, the euro was perched near

its highest in over three years at $1.1688. Sterling

rose 0.03% to $1.3730.

"Trump's desire to 'shadow' the Fed using a designated

replacement for Chair Jay Powell isn't a good way to promote the

perceptions of integrity and autonomy in U.S. policymaking and,

by extension, that of the reserve currency status of the U.S.

dollar," said Thierry Wizman, global FX and rates strategist at

Macquarie Group.

Adding to the Fed cut bets has been a raft of

weaker-than-expected U.S. economic data, with attention now

shifting to Friday's release of the core PCE price index, the

U.S. central bank's preferred measure of inflation.

U.S. Treasury yields were steady in Asia after falling the

previous session, with the two-year yield at 3.7418%

and the benchmark 10-year yield last at 4.2554%.

In commodities, oil prices were set for a weekly decline

with the Iran-Israel ceasefire holding and easing concerns over

Middle East supply risks.

Brent crude futures were up 0.41% at $68.01 a barrel

while U.S. crude rose 0.46% to $65.53 per barrel on

Friday, but both were headed for a fall of more than 10% for the

week.

Spot gold fell 0.23% to $3,320.25 an ounce.