Asian indices weakened in early trade , rattled by fresh trade war concerns following threats from President Donald Trump to Beijing, while increasing worries about a no-deal Brexit kept the pound under pressure.
China’s factory activity shrank for the third straight month in July, an official survey showed on Wednesday, underlining the need for more stimulus to support an economy hit hard by the bruising trade war with the United States.
The Chinese official non-manufacturing Purchasing Managers’ Index (PMI) fell to 53.7 from 54.2 in June, but stayed well above the 50-point mark that separates growth from contraction.
Later in the day, the U.S. Federal Reserve is widely expected to cut interest rates for the first time since the financial crisis more than a decade ago. The expected easing has supported risk asset prices worldwide.
As a new round of U.S.-China trade negotiations started in Shanghai, Trump tweeted that, if he wins re-election in November 2020, the outcome could be no agreement or a harsher one.
Fed funds rate futures are now fully pricing in a 25 basis point rate cut on Wednesday and another 25 basis point reduction by September.
U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that cemented expectations of Fed rate cuts.
Trump on Tuesday reiterated his call for the Fed to make a large interest rate cut, saying he was disappointed in the U.S. central bank and that it had put him at a disadvantage by not acting sooner.
The British pound remains near a 28-month low hit the previous day on growing concerns about a disorderly Brexit. Sterling traded at $1.2155, up 0.11% so far on the day, but not far from $1.2120 marked on Tuesday. It has fallen 4.2% so far this month, on course to log its worst monthly performance since October 2016.
Oil prices held firm near two-week highs after 2% gains on Tuesday. U.S. West Texas Intermediate crude gained 0.41% to $58.29 per barrel in early Asian trade.
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