Asia stocks steady ahead of Nvidia; investors wary over Fed independence

SINGAPORE: Asian stocks were steady on Wednesday ahead of an earnings report from AI leader Nvidia that will shape near-term risk sentiment, while the U.S. dollar was frail as investors remained nervous about attacks on Federal Reserve autonomy.

The U.S. Treasury yield curve has been steepening since President Donald Trump on Monday ordered the firing of Federal Reserve Governor Lisa Cook, an unprecedented move that could lead to a legal tussle after a lawyer for Cook said she will file a lawsuit to prevent it.

“The Fed has said it will abide by any decision the court makes on Lisa Cook but the reality is the Fed is in a bind,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

“If the court ends up ruling in favour of Trump, this potentially puts Chair (Jerome) Powell in line to be fired for permitting a non-Fed employee to make decisions on behalf of the Fed Board” should Cook continue to serve between Trump’s firing and the court’s decision.

Shorter-dated yields fell more than longer-dated ones, causing the yield curve to steepen.

The yield on the two-year note , which typically moves in step with interest rate expectations, hit its lowest since May at 3.654% in early Asian hours, while the yield on the 30-year note was 1.5 basis point higher at 4.923%.

Trump has repeatedly criticised Powell and policymakers for not cutting interest rates. Market watchers interpreted Powell comments last week as indicating cuts could be on the way.

That has led to investors wagering a cut next month, with traders pricing in an 84% chance of the Fed moving in September and expecting more than 100 bps of easing by June.

“Markets are anticipating a scenario where Trump holds the majority on the Board of Governors setting the stage for cuts to come sooner and potentially faster,” said Newnaha.

After an initial sharp drop in the dollar after Trump’s comment, the greenback remained near those lows. The euro last fetched $1.1636, while the yen was steady at 147.6 a dollar.

“I think investors are focused more on the upcoming payroll print and what that means for a September rate move.

The hope is that a rate cut is still on the cards without a sharp deterioration in the labour market,“ said Ben Bennett, APAC investment strategist at Legal and General Investment Management.

“That could keep investor sentiment very strong. Tonight’s Nvidia results will also be important for the near-term direction of markets.”

Data showed options traders are pricing in about a $260 billion swing in Nvidia’s market value after the firm reports earnings, where its business in China will be in focus following an unusual profit-sharing deal with the Trump administration.

Caught in the crossfire of a Sino-U.S. trade war, the fate of Nvidia’s China business hangs on where the world’s two largest economies land on tariff talks and chip trade curbs.

That has left traders hesitant in placing major bets. MSCI’s broadest index of Asia-Pacific shares outside Japan up just 0.2%, Japan’s Nikkei was little changed and share prices in Taiwan were up 0.6%.

China’s blue-chip stocks gained 0.3%, hovering near a three-year high touched earlier in the week. Stocks in China have been on a tear recently, buoyed by tech sector.

In commodities, spot gold was 0.23% lower after hitting a two-week high in the previous session.

Oil prices were little changed after falling in the previous session, as the market awaits massive new U.S. tariffs on imports from India, the world’s third-largest crude consumer, in response to India’s purchases of Russian oil.