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Dollar loiters near multi-year lows

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Powell reiterates wait-and-see approach to rate cuts

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Traders await US payrolls report for Fed cues

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Trump's tax bill passes Senate; House of Representatives

up next

(Updates to afternoon European hours)

By Ankur Banerjee and Johann M Cherian

SINGAPORE, July 2 (Reuters) - Global stocks edged higher

and the dollar traded close to a three-year low on Wednesday, 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 deadline for

countries to negotiate trade deals with the United States, even

as negotiations with top trade partner Japan failed to make

headway, although he expected a deal with India.

The European Union's trade chief was also expected to hold

talks this week in Washington to avert higher U.S. tariffs.

Europe's STOXX 600 added 0.6%, and Germany's DAX

climbed 0.4%. Across the Atlantic, futures tracking the

S&P 500 also pointed to a slightly higher open after the

benchmark index eased from its record high in the previous

session.

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

witnessed a choppy session and settled 0.1%

higher. However, trade uncertainties weighed on Japanese stocks

, which lost 0.5%.

"There's a lot of pressure on these trade deals and market

optimism is going to improve even if we're not going to return

to the pre-tariff situation, but as long as we remain at the

baseline (10%) and nothing gets out of hand," Daniela Hathorn, a

senior market analyst at Capital.com, said.

Economic data was also on the radar, with a private survey

on payrolls anticipated later in the day. A report on Tuesday

suggested that the U.S. labour market stayed resilient in May,

sharpening the focus on the U.S. nonfarm payrolls figures due on

Thursday as investors try to gauge when the Federal Reserve is

likely to cut rates next.

Fed Chair Jerome Powell, under pressure from Trump to cut

rates immediately, reiterated that the U.S. central bank planned

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

inflation before lowering borrowing costs.

Traders are pricing in about 64 basis points of cuts this

year from the Fed, with the odds of a move in July at 19%.

The dollar index, which measures the U.S. currency

against six peers, edged up 0.3%, but at 96.958 it was close to

its early-2022 low. Analysts have said that any signs of labour

market weakness could further weigh on the greenback.

"This is an awful market situation," said Hathorn. "Nothing

screams 'recession concerns' but, at the same time, there are no

reasons to be really bullish."

TRUMP'S BILL

Investors' 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, slash taxes

and reduce social safety net programmes.

The legislation returns to the House of Representatives,

where Republican leaders have set an initial procedural vote on

the bill at 1300 GMT.

The bill has stoked fiscal worries, but the reaction was

relatively muted in bond markets after it passed the Senate.

On the equities front, futures tracking the U.S. smallcaps

Russell 2000 index rose 1%.

A group of equity strategists led by Venu Krishna at

Barclays said that the proposed change to interest expense tax

deductibility for corporations could boost small-cap earnings.

Still, uncertainties about the repercussions on public

finances overall, coupled with concerns on the outlook for trade

and interest rates, have caused investors to flee U.S. assets

and look for alternatives. This was evident in the U.S. dollar's

10% decline in the first six months of the year, making it the

currency's worst first-half performance since the 1970s.

In commodities, spot gold edged 0.2% higher, having

risen 27% this year on safe-haven flows.

Oil prices perked up more than 1%, after Iran suspended

cooperation with the U.N. nuclear watchdog.