GLOBAL MARKETS-Asia stocks gain, dollar sags as Fed reinforces rate cut expectations

* MSCI Asia-Pacific index up 0.3%, Nikkei gains 1%
* Dovish views from Fed's Williams cement rate cut
expectations
* US yields fall, gold hits 6-year high on US rate cut
prospect
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Shinichi Saoshiro
TOKYO, July 19 (Reuters) - Asian stocks gained and the
dollar sagged on Friday after a top Federal Reserve official all
but cemented expectations of a U.S. interest rate cut later
this month.
New York Fed President John Williams said on Thursday that
policymakers need to add stimulus early to deal with too-low
inflation when interest rates are near zero and cannot wait for
economic disaster to unfold, in a speech read as a strong
argument in favour of quick action. The comments by Williams made it a virtual certainty the Fed
would opt to cut interest rates by 25 basis points (bps) at its
July 30-31 policy meeting and also fuelled expectations of an
even deeper 50 bp reduction.
Financial markets quickly reacted, with futures FF#: at
one point pricing in almost 70 percent chance of a
50-basis-point cut at the month-end meeting. The odds eased to
around 40 percent after the New York Fed clarified later that
Williams' speech was not about potential action at the upcoming
policy meeting. Wall Street shares shook off a sluggish start and moved
higher overnight thanks to the dovish comments by Williams. .N
Australian stocks .AXJO added 0.4%, South Korea's KOSPI
.KS11 rose 0.8% and Japan's Nikkei .N225 advanced 1%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was up 0.3%, squaring the previous day's losses.
The index was up only 0.3% on the week, as riskier assets
were partly capped by U.S. President Donald Trump's reiteration
of his threat to impose further duties on Chinese imports. The
two sides resumed talks recently to try and end a year-long
trade war that has rattled financial markets and slowed global
growth.
"Dovish Fed policy expectations do provide support for the
equity markets, which are set to rebound after suffering losses
the previous day. But factors such as U.S.-China trade issues
and tensions over Iran are likely to limit the markets' gains,"
said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS
Asset Management.
The dollar index .DXY against a basket of six major
currencies stood little changed at 96.778 after losing roughly
0.5% overnight to a two-week low of 96.671 in the wake of
comments from the Fed's Williams.
The greenback was up 0.15% to 107.460 yen JPY= after the
New York Fed tried to clarify Williams' earlier comments,
crawling away from a three-week trough of 107.210 marked on
Thursday when the currency lost 0.6% against its Japanese peer.
The euro EUR= was 0.1% lower at $1.1262 after climbing
0.45% the previous day.
U.S. Treasury yields were lower across the board in light of
Williams' dovish views. The 2-year yield US2YT=RR was at
1.7908% after touching a two-week low of 1.7520%. The 10-year
yield US10YT=RR declined to a 10-day trough of 2.023% and was
last at 2.045%.
In commodities, U.S. crude oil futures CLc1 rose 1% to
$55.90 per barrel after slumping 2.6% overnight.
Oil prices had fallen on Thursday amid expectations that
crude output would rise in the Gulf of Mexico following last
week's hurricane in the region. O/R
Spot gold XAU= extended the previous day's rally made on
the prospects of lower U.S. interest rates and brushed a
six-year high of $1,452.60 an ounce, before pulling back a touch
to $1,442.25.

(Editing by Shri Navaratnam)