Asian stocks drop on falling odds of aggressive Fed easing

• Risk under pressure due to low odds of bigger Fed rate cut. 
• Geopolitical tensions and trade tensions likely adding to bearish pressures. 

Asian stocks are reporting moderate losses at press time on falling odds of an aggressive US Federal Reserve rate cut later this months. 

As of writing, Japan’s Nikkei is down 0.33% and stocks in Australia and Hong Kong are shedding 0.16% and 0.65%, respectively. Meanwhile, the Shanghai Composite is down more than 1%, while futures on the S&P 500 are flat lined.

New York Fed President John Williams sounded dovish last week, pushing up the odds of the central bank lowering rates by 50 basis points at its July 30-31 meeting. 

The resulting risk-on in the US stocks, however, was short-lived with Wall Street shares ending with losses on Friday, as Williams’ walked back on hs comments by saying that his speech wa snot about the upcoming policy meeting. 

Further, the Wall Street Journal reported on Friday that the Fed was likely cut rates by 25 basis points later this month. 

As a result, the probability of a 50 basis point rate cut has almost evaporated. 

Apart from that, the heightened tensions in the Persian Gulf following Iran’s seizure of British oil tanker and trade tensions could be weighing over the Asian equities. 

The news hit the wires earlier today that China has imposed anti-dumping duties on steel imports from the European Union, Japan, South Korea and Indonesia.