By COMFORT OGBONNA
Asian stocks traded cautiously on Friday after a technology-led rally driven by strong results from Nvidia, while investors across currency and bond markets turned their attention to a closely watched speech from Federal Reserve Chair Kevin Warsh for clues about the future path of U.S. interest rates.
The cautious trading came after Nvidia shares surged nearly 9% in the previous session following stronger-than-expected results and an upbeat outlook for artificial intelligence spending. The company’s performance provided fresh support for technology stocks but did little to remove broader uncertainty over monetary policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%, while Japan’s Nikkei gained 0.5%.
Taiwanese stocks advanced 0.8%, supported by renewed optimism surrounding the global AI industry. Nvidia’s latest results reinforced expectations that demand for advanced chips and data-center infrastructure could remain strong for years as companies continue investing heavily in artificial intelligence.
South Korea’s KOSPI moved in the opposite direction, falling 1.5%, while Hong Kong’s Hang Seng Index rose 0.4%.
U.S. stock futures were slightly weaker, with S&P 500 futures and Nasdaq futures each down about 0.2%. EURO STOXX 50 futures edged 0.3% higher, pointing to a mixed start for European markets.
Investors’ attention was firmly focused on the Federal Reserve’s annual Jackson Hole symposium, where Warsh was scheduled to speak later Friday.
The speech comes at a particularly sensitive time for financial markets. Investors are attempting to determine whether the Federal Reserve will continue keeping interest rates high to contain inflation or begin moving toward lower borrowing costs as economic growth slows.
Several Federal Reserve officials have recently expressed concern that inflation remains stubbornly high. Warsh, who recently became the central bank’s new chairman, has so far avoided giving markets clear forward guidance about the timing or direction of future rate decisions.
Financial markets have nevertheless been attempting to assess the likelihood of a rate increase.
Futures markets were pricing in roughly a 35% probability of a Federal Reserve rate hike at the Sept. 16 meeting and were fully pricing in a move by December.
Analysts said investors were unlikely to receive a definitive signal from Warsh but would be looking for greater clarity about how policymakers are likely to respond to inflation, economic growth and financial conditions.
“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,” analysts at ANZ said in a note.
The analysts warned that markets could react negatively if Warsh failed to provide enough clarity, particularly after recent volatility in the bond market.
Longer-term U.S. Treasury yields have climbed sharply since the Federal Reserve’s July meeting, reflecting concerns that interest rates could remain elevated for longer than previously expected.
The rise in yields has also been influenced by concerns about persistent inflation and uncertainty surrounding the Federal Reserve’s policy direction.
On Friday, the yield on the 30-year U.S. Treasury bond rose one basis point to 5.2045%. Despite the increase on the day, the yield was down about seven basis points for the week.
The 30-year yield briefly climbed above 5.3% last week, reaching its highest level since 2007. The sharp rise in borrowing costs contributed to a period of turbulence in the bond market and prompted the U.S. Treasury to announce an increase in its bond buyback program.
The 10-year Treasury yield also rose one basis point on Friday to 4.6842%, although it remained about five basis points lower for the week. The two-year Treasury yield was little changed at 4.2340% and was roughly flat for the week.
The dollar was also relatively stable against a basket of major currencies, with the dollar index at 99.20. It was nevertheless on track for a 0.4% weekly gain.
The Australian dollar was among the strongest-performing major currencies after unexpectedly strong inflation data released earlier in the week caused investors to reassess expectations for the Reserve Bank of Australia’s interest-rate policy.
The Australian currency reached a three-month high of about $0.72 and was headed for a weekly gain of roughly 0.4%. If the gain holds, it would mark the currency’s ninth consecutive week of advances.
Oil prices, meanwhile, remained under pressure as markets assessed developments involving Iran and the Strait of Hormuz.
Brent crude fell 0.4% to about $89.33 a barrel and was heading for a weekly decline of more than 5%.
Iran and Oman have agreed on arrangements for managing traffic through the Strait of Hormuz and sharing revenues, a development that could help ease concerns about disruptions to oil shipments through the strategically important waterway.
However, uncertainty remained because Washington has shown limited interest in restarting direct negotiations with Tehran.
The Strait of Hormuz remains one of the world’s most important energy shipping routes, making any disruption there a potential source of significant volatility in global oil markets.
The combination of easing oil prices, shifting interest-rate expectations and uncertainty over geopolitical developments has left investors cautious as they await further direction from central banks and economic data.
Gold also weakened on Friday, falling 0.5% to about $4,579 an ounce. The precious metal was on track for a modest weekly decline of about 0.5%.
Markets are now waiting to see whether Warsh’s remarks can provide greater clarity on the Federal Reserve’s approach to inflation and interest rates. His comments could influence bond yields, the dollar and global equities as investors reassess the outlook for borrowing costs heading into the final months of the year.
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