Asia Shares Flat as Investors Eye Iran Sanctions, Nvidia Earnings, and Fed Policy
Market Overview and Key Drivers
By Wayne Cole
SYDNEY, Aug 24 (Reuters) - Share markets were flat in Asia on Monday and oil prices eased as investors awaited details of threatened U.S. sanctions on Iran due later in the session, while the Canadian dollar dipped as a trade war loomed with its southern neighbour.
Nvidia Earnings in Focus
The entire tech sector is holding its breath for Nvidia's results on Wednesday; investors are aware how hard it will be for the chip maker to meet stratospheric expectations.
Analysts are generally looking for quarterly revenue to almost double to around $92 billion, with full-year earnings guidance seen in a range of $103 billion to $105 billion.
Federal Reserve Policy and Interest Rates
Market participants will also be hoping for some clarity on the outlook for U.S. interest rates when Federal Reserve Chairman Kevin Warsh speaks in Jackson Hole, Wyoming, on Friday, though his well-known aversion to forward guidance could lead to disappointment.
Expectations for Fed Guidance
"There are several reasons to expect to be underwhelmed," said Bruce Kasman, chief economist at JPMorgan, noting that past chairs have not wanted to front-run Fed decisions at the event.
"Warsh will rather likely focus on aspects of his 'regime change' agenda," Kasman added. "As the Fed has already been moving toward shrinking the balance sheet, and the committee gave the balance sheet some attention in the July minutes, that might be the most likely topic for him to expound upon."
Interest Rate Outlook and Inflation
Markets imply around a 40% chance that the Fed will raise interest rates when it meets on September 16 and are fully priced for a move by December.
The odds could change depending on what U.S. inflation figures show this week, with median forecasts for core inflation expected to hold at 3.3% in July.
Warsh is sure to face questions about Treasury Secretary Scott Bessent's surprise announcement last week of at least a doubling in bond buybacks, aimed at restraining a rise in yields that was tightening financial conditions in the economy.
His efforts have had little success so far, with 30-year yields back up at 5.2760%, not far from the recent 19-year peak of 5.3371%.
Higher yields make debt more attractive compared to equities while lifting the discount applied to future earnings, highlighting the stretched nature of some valuations.
Sanctions and Trade Wars
Iran Sanctions
Bessent is due to hold a news conference later on Monday to outline sanctions on Iran, which has shown no sign of relinquishing its control over the vital Strait of Hormuz.
Brent slipped 1.0% to $93.43 ahead of the announcement, though that followed gains of 6.6% last week. U.S. crude eased 1.1% to $86.14 a barrel. [O/R]
Regional Market Reactions
Equity markets were quiet in early trade, with the Nikkei near flat after having fallen almost 4% last week. South Korean shares eased 0.8%, while Taiwan dipped 0.5%.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2%.
In Europe, EURO STOXX 50 futures, DAX futures and FTSE futures were all little changed. On Wall Street, S&P 500 futures and Nasdaq futures were a fraction lower.
Currency Markets and Trade Tensions
Canada-U.S. Trade Dispute
In currency markets, the dollar added 0.1% against its Canadian counterpart to 1.3784 after Prime Minister Mark Carney said his country would respond to U.S. tariffs with levies of its own as trade talks broke down.
Canada will impose tariffs on U.S. steel, dairy, appliances, agricultural equipment, pulp and paper and electronics, along with some products that the U.S. previously targeted in Canada.
Dollar Performance and Gold
The dollar was on the defensive elsewhere after having lost 0.8% last week against a basket of currencies at 96.832. The euro held at $1.1675 after rising 0.9% last week, while the dollar was flat at 159.00 yen.
The dollar has been undermined as investors fret that growing U.S. debt and policy uncertainties will erode the purchasing power of the currency, driving demand for scarcer assets including gold.
The yellow metal firmed 0.4% to $4,623 an ounce, having climbed more than 14% for the month so far. If it holds this gain for all of August, it would be the biggest monthly rise on record. [GOL/]
(Reporting by Wayne Cole; Editing by Thomas Derpinghaus)
