* Asian stocks drop as hopes for large Fed cut fade
* European futures point to lower stock market open
* Apple slumps on downgrade, suppliers in Asia fall
* Markets focus on Fed chair's testimony this week
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Noah Sin and Hideyuki Sano
HONG KONG/TOKYO, July 9 (Reuters) - Asian stocks hovered
around two-and-a-half week lows on Tuesday as expectations waned
for a hefty interest rate cut by the U.S. Federal Reserve later
this month, while technology companies retreated on Apple Inc's
AAPL.O overnight drop.
European stock markets were set to follow Asia and U.S.
markets lower. Futures for the pan-regional Euro Stoxx 50
STXEc1 slid 0.4%, German DAX futures FDXc1 fell 0.7%, and
London's FTSE futures FFIc1 were down 0.2% in early trade.
Investors have rushed to scale back Fed rate cut
expectations following unexpectedly strong gains in U.S. jobs
for June.
The jobs figures "have been a good reminder that the market
may have gone well ahead of itself when it comes to the pricing
of an eventual monetary easing in the United States," Ipek
Ozkardeskaya, senior market analyst at London Capital Group,
said in a note on Tuesday.
Japan's Nikkei .N225 was the outlier in Asia, inching up
0.1% thanks to gains in a few heavyweights in the index.
[nL4N24A1FB ]
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS dropped 0.4% but pared earlier losses, having
traded at its lowest level since June 19.
In China, the Shanghai Composite .SSEC was 0.2% lower and
the blue-chip CSI300 .CSI300 was off 0.3%, while Hong Kong's
Hang Seng .HSI fell 0.7%.
On Wall Street, the S&P 500 .SPX lost 0.5% while the
Nasdaq Composite .IXIC dropped 0.8%, led by fall in Apple
after a brokerage downgraded the stock to "sell". .N
Apple's suppliers in Japan, such as Murata Manufacturing
6981.T and Taiyo Yuden 6976.T , fell 2% and 4%. In Greater
China, suppliers from Hon Hai 2317.TW to AAC Tech 2018.HK
lost between 1.4% and 3.1%.
Money market futures 0#FF: are still fully pricing in a 25
basis point (bps) cut at the Fed's next policy meeting on July
30-31, but have almost priced out a larger 50 bps move.
FEDWATCH
"The headline payrolls figures was pretty strong but wages
were tepid, so on the whole a 25 basis-point cut would be
justified as an pre-emptive move and I think the current market
pricing is fair," said Naoya Oshikubo, senior economist at
Sumitomo Mitsui Trust Asset Management.
Global equities will likely remain under pressure after last
month's outperformance, Pictet Wealth Management said in a memo
on Tuesday.
"After a strong rally in June that more than erased the May
drawdown, valuations look demanding, underpinning our
underweight stance," the firm said. "We expect (emerging market)
equities to perform sideways in the coming weeks, but with the
possibility of rotation to quality cyclicals."
Investors' focus is shifting to Fed Chairman Jerome Powell's
testimony before Congress later in the week for clues on
monetary policy. FED/DIARY
"What the market will be looking for is whether the language
is as dovish as previously (at last policy meeting)," said
Christy Tan, head of market strategy for Asia at National
Australia Bank. "There's been some over-dovishness in what the
Fed needs to do in the market."
DOLLAR STRENGTH
In the currency market, fading Fed rate cut expectations
helped the dollar. FRX/
The euro dropped as low as to 1.1204 EUR= , its weakest
level since June 19.
The dollar changed hands at 108.78 yen JPY= , having risen
in the previous session to its highest in more than a month.
The dollar index .DXY versus a basket of six major
currencies was a touch higher at 97.432.
The British pound stood at 1.2485 GBP=D4 , not far from
six-month lows of $1.2481 touched on Friday.
Oil prices were slightly softer as concerns about whether
slowing global economic growth would hit oil demand eclipsed
tensions over Iran's nuclear programme.
Brent crude LCOc1 futures fell 0.2% to $64.01 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 futures shed
0.4% to $57.46.
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Dot plot, Fed funds futures July 9 https://tmsnrt.rs/2YLmEzm
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(Additional Reporting by Donny Kwok in HONG KONG; Editing by
Shri Navaratnam, Kim Coghill and)