Asian equities stall rally, eyeing China stimulus, Powell testimony. After their best weekly run in five months, Asian shares started cautiously on Monday as investors awaited China’s rate decision and U.S. Federal Reserve Chair Jerome Powell’s advice.

After Wall Street’s bullish run stalled Friday, S&P 500 and Nasdaq futures were mostly flat. Futures were stable, while cash U.S. Treasuries were untraded on Juneteenth.
Japan’s Nikkei (.N225) fell 0.4% after clinching a three-decade top on Friday, bolstered by the BOJ’s ultra-easy policy stance, which sent the yen to a 7-month low against the U.S. dollar.

After rising 3% for the week, MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) dipped 0.6%.

The Hang Seng index (.HSI) fell 0.6%, and China’s blue chips (.CSI300) fell 0.5%.

After the cabinet convened on Friday to debate economic stimulus measures, hopes for stronger stimulus in China are rising. Still, questions remain over whether it would be enough to revitalize the economy.

After cutting medium-term policy loans last week, the People’s Bank of China is expected to decrease benchmark lending prime interest rates on Tuesday.

Morgan Stanley anticipates a stimulus package with looser property buying limits in leading cities, infrastructure support, and targeted consumption subsidies.

“Given that 2Q GDP growth is tracking at 0%, a strong sequential growth re-acceleration will be needed for full-year GDP growth to reach the government target of “about 5%”,” said chief China economist Robin Xing.

After recent poor statistics, several big banks lowered China’s growth projections last week.

On Monday, U.S. Secretary of State Antony Blinken will conclude his unusual visit to China. Investors are eager to see if he will see China’s President Xi Jinping, which would be a positive indication for relations between the world’s two largest economies.

After the stock market celebrated the Fed’s decision to postpone a rate hike in June, investors are looking to several Fed speakers this week, including Powell’s congressional hearings on Wednesday and Thursday.

Markets are pricing in a 70% chance that the Fed will raise rates by a quarter point in July before keeping them constant for the rest of the year.

“Fed Chair Powell gives House and Senate testimony with focus on whether the July FOMC (Federal Open Market Committee) meeting is truly ‘live’, and if the Fed dot plot of two more hikes is a true base case depending on the data or more ‘aspirational’,” said National Australia Bank’s head of foreign exchange strategy, Ray Attrill.

On Thursday, the Bank of England will hike rates by a quarter point to 4.75%, a 15-year high. Markets expect British central bank rates to rise roughly 6% this year.

After losing 1.2% last week, the dollar index remained at 102.34 early Monday.

The dovish BOJ pushed the yen to a seven-month low of 141.90 per dollar, while the hawkish ECB, which boosted rates by a quarter point last week, kept the euro near a five-week high at $1.094.

Oil fell almost 1% on Monday. Brent crude declined 1.3% to $75.63 a barrel, while U.S. crude fell 1.0% to 71.03.

Gold fell 0.1% to $1,955.77 per ounce.