Asian markets drop as traders await Powell speech

Equities stuttered in Asia Wednesday as investors took a step back after recent gains, with focus now turning to a key speech by Federal Reserve boss Jerome Powell at the end of the week.

Rising hopes for China-US trade talks have provided a much-needed lift to markets over the past two days but with few fresh catalysts, dealers are keeping their powder dry ahead of Friday's address.

After positive signals from Donald Trump and some of his top advisers on Monday over progress in the talks with Beijing, and an olive branch with the delay of a ban on Huawei purchases, there have been few developments for traders to buy on.

"Our trade-war headline-inspired relief rally appears to have run its course as I suspect there is still a lot of nervousness among US investors as the global economic realities are just too hard to ignore," said Stephen Innes at Valour Markets.

Hong Kong added 0.2 per cent, Shanghai was barely moved and Tokyo ended down 0.3 per cent. Sydney fell almost one percent, Singapore shed 0.3 per cent and Wellington was 0.9 per cent lower.

Taipei finished flat and Seoul added 0.2 per cent. In early trade, London rose 0.5 per cent, Paris added 0.8 percent and Frankfurt was up 0.5 per cent.

The Fed releases minutes of its July meeting later Wednesday which will provide an insight into its deliberations when cutting interest rates for the first time since the financial crisis.

But Powell's talk at the central bankers' gathering in Jackson Hole, Wyoming, is the key event and will be closely pored over for clues about the bank's plans for next month, with experts unable to agree on whether or not he will announce further cuts.

There has been increased speculation that central banks and governments will step in with stimulus support to head off a global downturn, but analysts warn they could be disappointed by what Powell has to say regarding Fed action.

Wall Street and Trump "are anticipating that Mr Powell will signal that the Federal Reserve is about to embark on a reinvigorated wave of easing, following its global peers", said Jeffrey Halley, OANDA senior market analyst for Asia-Pacific.

"The US data of late simply does not support the need for an aggressive easing cycle. Despite the US-China trade tensions making their presence felt in European and Asian data prints, this has simply not happened with the United States to any significant degree."
"I think the word recession is inappropriate," he told reporters at the White House. "We're very far from recession."