GLOBAL MARKETS-Stocks edge higher, dollar wobbles with tariffs, Fed uncertainty in focus

Global stocks edged higher and the dollar traded close to a three-year low on Wednesday, as investors pondered the prospect of U.S. interest rate cuts and the scramble for trade deals ahead of President Donald Trump's July 9 deadline for tariffs. Trump said he was not considering extending the deadline for countries to negotiate trade deals with the United States, even as negotiations with top trade partner Japan failed to make headway, although he expected a deal with India.

The European Union's trade chief was also expected to hold talks this week in Washington to avert higher U.S. tariffs. Europe's STOXX 600 added 0.6%, and Germany's DAX climbed 0.4%. Across the Atlantic, futures tracking the S&P 500 also pointed to a slightly higher open after the benchmark index eased from its record high in the previous session.

MSCI's broadest index of Asia-Pacific shares outside Japan witnessed a choppy session and settled 0.1% higher. However, trade uncertainties weighed on Japanese stocks , which lost 0.5%. "There's a lot of pressure on these trade deals and market optimism is going to improve even if we're not going to return to the pre-tariff situation, but as long as we remain at the baseline (10%) and nothing gets out of hand," Daniela Hathorn, a senior market analyst at Capital.com, said.

Economic data was also on the radar, with a private survey on payrolls anticipated later in the day. A report on Tuesday suggested that the U.S. labour market stayed resilient in May, sharpening the focus on the U.S. nonfarm payrolls figures due on Thursday as investors try to gauge when the Federal Reserve is likely to cut rates next. Fed Chair Jerome Powell, under pressure from Trump to cut rates immediately, reiterated that the U.S. central bank planned to "wait and learn more" about the impact of tariffs on inflation before lowering borrowing costs.

Traders are pricing in about 64 basis points of cuts this year from the Fed, with the odds of a move in July at 19%. The dollar index, which measures the U.S. currency against six peers, edged up 0.3%, but at 96.958 it was close to its early-2022 low. Analysts have said that any signs of labour market weakness could further weigh on the greenback.

"This is an awful market situation," said Hathorn. "Nothing screams 'recession concerns' but, at the same time, there are no reasons to be really bullish." TRUMP'S BILL

Investors' focus over the last few days has pivoted to the progress of Trump's massive tax and spending bill, which is expected to add $3.3 trillion to the national debt, slash taxes and reduce social safety net programmes. The legislation returns to the House of Representatives, where Republican leaders have set an initial procedural vote on the bill at 1300 GMT.

The bill has stoked fiscal worries, but the reaction was relatively muted in bond markets after it passed the Senate. On the equities front, futures tracking the U.S. smallcaps Russell 2000 index rose 1%.

A group of equity strategists led by Venu Krishna at Barclays said that the proposed change to interest expense tax deductibility for corporations could boost small-cap earnings. Still, uncertainties about the repercussions on public finances overall, coupled with concerns on the outlook for trade and interest rates, have caused investors to flee U.S. assets and look for alternatives. This was evident in the U.S. dollar's 10% decline in the first six months of the year, making it the currency's worst first-half performance since the 1970s.

In commodities, spot gold edged 0.2% higher, having risen 27% this year on safe-haven flows. Oil prices perked up more than 1%, after Iran suspended cooperation with the U.N. nuclear watchdog.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)