Stock markets mixed on US Fed chief's outlook

Markets turn cautious and vigilant as Powell seizes centre stage

Japan's Nikkei slipped 0.1 percent.

Asian stocks posted modest gains, following their USA counterparts, after comments by Federal Reserve Chairman Jerome Powell cemented market bets for a rate cut this month. E-Mini futures for the S&P 500 ESc1 were flat, while EUROSTOXX STXEc1 and FTSE FFIc1 futures pointed to small opening gains in Europe.

The automotive sector felt much of the pressure with large-cap vehicle parts suppliers Valeo and Continental tumbling more than 2% following a slew of warnings by small-cap auto and industrial suppliers AAGG.DE .

In an appearance before his congressional overseers on Wednesday, Powell confirmed that the US economy is still under threat from disappointing factory activity, tame inflation and a simmering trade war. "There is now economic evidence that the outlook for the US economy is not that great", said Juan Perez, senior currency trader at Tempus Inc in Washington.

Investors in equities and bonds are looking for fresh reasons to chase this year's gains, but an interest rate cut by the Fed this month is already priced in and recent economic data has been mixed, making the path for future monetary policy less clear.

Yet the gloom seemed confined to Europe for now.

The Shanghai Composite added 0.82%, whereas both the Shenzhen component and Shenzhen composite additionally gained about 1%. In Asia, rising tensions between Japan and South Korea have added to existing headwinds for trade and added to challenges for the tech industry. That sent the S & P 500 surging past 3,000 points for the first time.

Federal Reserve Chair Jerome Powell, who struck a dovish tone before a congressional panel Wednesday, returned to Capitol Hill to answer senators' questions and suggested that the central bank has room to ease as the tie between the inflation and jobless rates has broken down.

How deep will the Fed cut interest rates?

Dow Jones Industrial Average reaches 27,000 for the first time ever
In the first of two testimonies on successive days, Powell said "broad" global weakness is clouding the USA economic outlook. At the moment, the USA economic landscape is a mixed one: The job market appears resilient, but economic growth is slowing.

"The focus going forward is US data, such as tonight's CPI, and whether the economy warrants a 50 basis point rate cut this month".

Stronger-than-expected employment growth in June tempered expectations that the Fed would opt for aggressive rate cuts at a meeting ending July 31.

The Canadian dollar was on the defensive before a Bank of Canada meeting, in case policymakers tried to slow the currency's recent rally.

The dollar index.DXY, tracking the greenback against six major currencies, dropped 0.29%.

The Bloomberg Dollar Spot Index dipped 0.1% to the lowest in a week.The euro climbed 0.1% to $1.1258.The British pound climbed 0.3% to $1.2542, the biggest increase in three weeks.The Japanese yen gained 0.2% to 108.25 per dollar. It was still some distance from a six-month trough of 106.780 set on June 25.

Gold fell 0.3 per cent to $US1,393.68 per ounce as the dollar gained. Traders will be eyeing that testimony for further clues after a measure of US consumer prices rose more than forecast in June.

In commodities, United States crude oil futures extended the previous day's large gains to touch $60.83 per barrel, their highest since May 23.

Brent crude futures LCOc1 were up $1.92, or 3%, to $66.08 a barrel, while U.S. West Texas Intermediate crude futures CLc1 climbed $1.75, also 3%, to $59.58 a barrel.

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