By Ankur Banerjee
SINGAPORE (Reuters) -Asian stocks meandered on Wednesday ahead of an earnings report from AI leader Nvidia that will shape near-term risk sentiment, while the U.S. dollar wobbled as investors remained nervous about attacks on Federal Reserve autonomy.
European futures indicated a higher open but investors are likely to take a dim view of the political drama in France after Prime Minister Francois Bayrou’s gamble to win backing for his deeply unpopular debt-reduction plan backfired.
The latest political turmoil comes after France lost its last prime minister, Michel Barnier, to a no-confidence vote over the budget in late 2024, after just three months in office.
Meanwhile, 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.
The yield on the two-year note, which typically moves in step with interest rate expectations, hit its lowest since May at 3.654% but was last up 1.8 basis points at 3.661%. The yield on the 30-year note was 1.4 bps higher at 4.922%.
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.
The dollar staged a small recovery in Asian hours after dropping in the previous session. The euro eased 0.2% at $1.161825, while the yen weakened to 147.87 a dollar. [FRX/]
“I think investors are focused more on the upcoming payroll print and what that means for a September rate move,” said Ben Bennett, APAC investment strategist at Legal and General Investment Management.
“The hope is that a rate cut is still on the cards without a sharp deterioration in the labour market. 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.
MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. Chinese stocks though remain on the charge with the blue-chip stock index hitting a three-year high, buoyed by tech sector.
In commodities, spot gold was 0.47% lower after hitting a two-week high in the previous session.
Oil prices steadied after falling in the previous session, as the market watched for fresh developments in the Ukraine war and investors weighed hefty new U.S. tariffs on India, the world’s third-biggest crude consumer.
Brent crude futures rose 5 cents to $67.27 per barrel, while West Texas Intermediate crude futures were up 3 cents at $63.28.
(Reporting Ankur Banerjee; Editing by Christopher Cushing and Lincoln Feast.)
