Stocks in Asia trade cautiously on comments from Fed’s Bullard

Mainland Chinese shares slipped in early trade, with the Shanghai composite declining 0.45% and the Shenzhen component falling 0.52%. The Shenzhen composite also fell 0.608%.

Over in Hong Kong, the Hang Seng index shed 0.19% as shares of Chinese tech giant Tencent fell around 1%.

Japan’s benchmark Nikkei 225 was 0.455% lower in morning trade, with shares of index heavyweight Softbank Group dropping more than 2%.

In South Korea, the Kospi slipped 0.21%, with shares of industry heavyweight Samsung Electronics declining more than 1%.

Over in Australia, the ASX 200 traded fractionally higher. Investors will be watching out for the release of the Reserve Bank of Australia’s decision on interest rates, set to be released at 12:30 pm. HK/SIN. Ahead of that, the financial subindex Down Under fell about 0.1%, with bank shares trading mixed.

Overnight on Wall Street, the Nasdaq Composite dropped around 1.6% to enter correction territory, closing more than 10% below its record high set in late April at about 7,333.02. The S&P 500 declined 0.3% to close at 2,744.45 while the Dow Jones Industrial Average ended the trading day just above breakeven at 24,819.78.

The moves came as investors continue to watch for developments on U.S.-China trade, with tensions having risen since the two economic powerhouses engaged in a tariff escalation on each other’s goods in May.

Meanwhile, Federal Open Market Committee voting member James Bullard said Monday that an interest rate cut “may be warranted soon ” due to the potential impact of global trade tensions as well as weak U.S. inflation on economic growth.

“The market has become even more aggressive in factoring in Fed easing over the past week,” strategists at Singapore’s DBS Bank wrote in a morning note. They added that four cuts are now factored in, by end 2020, as compared to three a week ago.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.173 after sliding from levels above 97.6 yesterday.

“USD finally appears to be taking notice of the risk of Fed rate cuts,” Richard Grace, chief currency strategist and head of international economics at Commonwealth Bank of Australia, wrote in a note. “The risk is now moving towards the Fed cutting rates earlier than our December forecasts.”

The Japanese yen traded at 107.86 against the dollar after touching levels around 109.9 last week. The Australian dollar changed hands at $0.6965 after touching an earlier high of $0.6977.

Oil prices were largely unchanged in the morning of Asian trading hours, with the international benchmark Brent crude futures contract and U.S. crude futures largely flat at $61.27 per barrel and $53.24 per barrel, respectively.

— CNBC’s Fred Imbert contributed to this report.