Shares turn cautious ahead of Warsh speech; FX, bonds hold breath

SYDNEY: Shares in Asia turned cautious on Friday after a Nvidia-fuelled technology rally, while currency and bond markets held their breath for the world’s most powerful central banker to speak on US interest rates.

Oil prices were headed ​for weekly losses as Iran and Oman had agreed on administering traffic in the Strait of Hormuz ‌and sharing revenues, though Washington has shown little interest in reviving direct talks with Tehran.

Brent eased 0.1% to $89.63 a barrel but was set for a weekly drop of over 5%.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1%, while Japan’s Nikkei rose 0.5%.

Taiwanese shares gained ​1.2% after Nvidia jumped nearly 9% overnight after the chipmaker reported robust results and signalled the AI spending ​boom has years left to run. South Korea’s KOSPI, however, fell 1%, and Hong Kong’s Hang ⁠Seng was down 0.3%.

S&P 500 futures and Nasdaq futures were off 0.1%, while EURO STOXX 50 futures edged up ​0.3%.

All eyes are on the Federal Reserve’s Jackson Hole Symposium where chair Kevin Warsh is slated to speak later in the day.

​Three Fed officials have already sounded the alarm about sticky inflation but the new central bank chief has resisted providing forward guidance about where interest rates are going.

Futures imply around a 35% chance that the Fed will raise interest rates when it meets on September 16 and are ​fully priced for a move by December.

“While we do not expect him to offer forward guidance, markets are hoping he ​will reduce some of the uncertainty surrounding the Fed’s reaction function,” said analysts at ANZ in a note to clients.

“We do not expect ‌that ⁠will be forthcoming but, given recent volatility in rates markets, if Warsh offers too little, that could lead to an adverse market reaction.”

Longer-dated yields have jumped after the Fed’s July meeting as Warsh was seen as not offering enough concrete steps for addressing persistently high inflation. He is also presiding over a divided Fed, with several policymakers calling for interest rate increases ​to stem price pressures.

Futures imply around a 35% chance that the Fed will raise interest rates when it meets on September 16 and are ​fully priced for a move by December.

“While we do not expect him to offer forward guidance, markets are hoping he ​will reduce some of the uncertainty surrounding the Fed’s reaction function,” said analysts at ANZ in a note to clients.

“We do not expect ‌that ⁠will be forthcoming but, given recent volatility in rates markets, if Warsh offers too little, that could lead to an adverse market reaction.”

Longer-dated yields have jumped after the Fed’s July meeting as Warsh was seen as not offering enough concrete steps for addressing persistently high inflation. He is also presiding over a divided Fed, with several policymakers calling for interest rate increases ​to stem price pressures.

In commodity markets, gold slipped 0.3% ​to $4,587 an ounce and was set for a small drop of 0.2% this week.