SYDNEY, July 8 (Reuters) - Asian shares were a sea of red on Monday after strong USA job gains tempered expectations the Federal Reserve will deliver a large rate cut, while the Turkish lira hovered near two-week lows on worries about central bank independence.
USA investment bank Morgan Stanley's decision to reduce its exposure to global equities due to misgivings about the ability of policy easing to offset weaker economic data also weighed on investor sentiment. In his defense, Powell has said the Fed is an independent bank "insulated from short-term political pressures".
After earlier touching their highest level since early May, Deutsche Bank shares slumped 3.3% as investor enthusiasm fizzled out for the bank's move to cut 18,000 jobs around the world as part of a restructuring plan that will cost 7.4 billion euros.
The technology .SPLRCT index was down 0.8%, while the healthcare index .SPXHC dropped 0.9%, weighed down by President Donald Trump's recent statement about an upcoming executive order that would lower prescription drug prices. It doesn't mean we can't rally from here, and it certainly doesn't mean we can't buy this market on a break above the highs from the Friday session, as it is a potentially strong reversal signal. Apple dropped 2.1% and Merck fell 1.8%.
"We are lowering our exposure to global equities to the range we consider "underweight", Morgan Stanley's London-based strategist Andrew Sheets said in a note. Government has not revealed the official reason for the sacking.
Capital Economics echoed Bank of America's prediction.
On Friday, the jobs report showed a more upbeat picture of the employment situation in the United States than expected. They will also be looking to see whether Trump's repeated calls for rate cuts and attacks on the central bank might force its hand.
European stocks set to open lower following powerful USA jobs data.
Futures on the S&P 500 Index added 0.1% as of 8:06 a.m.in Tokyo.
"Whether the negotiators can find a solution to the hard structural issues that remain between the two sides is another matter, and Kudlow cautioned there was "no timeline" to reach an agreement", National Australia Bank strategist Rodrigo Catril said.
The Turkish Lira is back to the news headlines after President Recep Tayyib Erdogan's decision to dismiss the country's central bank governor.
The dollar index, which measures the greenback against a basket of major currencies, was a shade weaker at 97.245 after climbing to a 2-1/2-week top of 97.443 on Friday. Economists expect the annualized rate of core consumer price inflation to remain unchanged at 2 percent in June, with the overall inflation slowing down to 1.6 percent in June from 1.8 percent in the prior month.
Last Friday, the Labor Department said non-farm employers added 224,000 jobs last month - the most in five months, and not the kind of labor market that would normally cause policymakers at the USA central bank to cut interest rates.
"So far US. -Iran tensions have not had a material impact on markets, but if tensions escalate it could be a different story", said NAB's Catril.
USA crude CLc1 rose 0.73% to $57.93 per barrel and Brent crude LCOc1 gained 0.4% to $64.49 per barrel. U.S. West Texas Intermediate was trading 0.4 percent down at $57.47 a barrel, after falling as low as $56.03 on Wednesday, its lowest since the June 20.