Most Asian stocks advance as focus shifts to Fed speech

Asian stock markets saw a general rise on Friday, with investors keenly awaiting a speech by Federal Reserve Chair Kevin Warsh. The address is expected to provide crucial clues about the outlook for interest rates, particularly as inflation remains elevated and the Middle East crisis shows no sign of resolution. The recent euphoria surrounding Nvidia's strong earnings report has subsided, shifting market focus back to economic fundamentals.

Debate continues regarding whether and when the US central bank will tighten monetary policy. While the Federal Reserve kept borrowing costs unchanged at its last meeting, dissent among policymakers indicated a potential shift. Although recent inflation figures showed a slight easing, they remain significantly above the 2% target. Concerns about persistent price rises, exacerbated by a spike in energy costs due to the Iran war, have increased long-term Treasury yields, making government borrowing more expensive.

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the most consequential central bank speech left this year

Traders are looking to Warsh's speech at the Jackson Hole symposium for insight into the decision-makers' thinking. However, analysts caution that his previous public appearance after the July meeting was perceived as ambiguous. His reluctance to provide forward guidance could leave investors disappointed once again. Stephen Innes of Quintex Intel described the speech as "the most consequential central bank speech left this year," noting it precedes the next policy announcement by nearly three weeks.

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Recent data have reduced the immediate need for tighter policy, giving Warsh room to re-establish the Fed's inflation-fighting message without signalling imminent action.

"Recent data have reduced the immediate need for tighter policy, giving Warsh room to re-establish the Fed's inflation-fighting message without signalling imminent action," Innes wrote. He added that the speech occurs against a challenging backdrop, with inflation above target for six consecutive years and Fed officials debating the necessity of tighter policy.

Equity markets in Asia were broadly higher in early trading. Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Jakarta, and Taipei all saw gains, while Seoul, Wellington, and Manila retreated. Wall Street had provided a positive lead, with all three major indexes rising, driven solely by the technology sector. Oil prices edged down but remain vulnerable to further spikes as efforts to reopen the Strait of Hormuz to traffic continue.

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The speech arrives against a difficult policy backdrop. Inflation remains above target for a sixth consecutive year, while Fed officials have begun debating whether tighter policy may still be required.