Shares flat in Asia before Iran sanctions news, Nvidia results

On Monday, share markets in Asia remained relatively stable while oil prices declined as investors awaited details about the impending U.S. sanctions on Iran. The Canadian dollar also dropped due to the looming trade war with its southern neighbor. Tech stocks, particularly Nvidia, are eagerly anticipating Wednesday's results, as it is challenging for the chip maker to meet lofty expectations.

Analysts forecast Nvidia's quarterly revenue to surge nearly double, reaching approximately $92 billion, with full-year earnings guidance ranging from $103 billion to $105 billion.

Investors are keen on receiving clarity on U.S. interest rates during Federal Reserve Chairman Kevin Warsh's presentation in Jackson Hole, Wyoming, on Friday. However, Warsh's history of avoiding forward guidance may lead to disappointment. According to Bruce Kasman, chief economist at JPMorgan, "There are several reasons to expect to be underwhelmed," as past chairmen refrained from anticipating Fed decisions at the event.

Warsh is likely to focus on aspects of his 'regime change' agenda, most likely discussing the Federal Reserve's balance sheet reduction, which has been a topic of discussion in recent minutes.

While the Fed has been gradually shrinking the balance sheet, the committee's attention to the balance sheet in the July minutes suggests that it might be the focus of Warsh's upcoming remarks. Market participants estimate around a 40% probability of an interest rate hike during the September 16 meeting, with expectations for a move by December already priced in. The odds may shift depending on the upcoming U.S. inflation data, with median forecasts predicting core inflation to remain at 3.3% in July.

Warsh will also likely grapple with questions surrounding Treasury Secretary Scott Bessent's recent announcement of a potential doubling of bond buybacks. The aim is to curb rising yields and ease financial conditions in the economy; however, Bessent's efforts have had limited success. As of now, 30-year yields are at 5.2760%, close to the recent 19-year peak of 5.3371%.

Elevated yields make debt more appealing compared to equities and increase the discount applied to future earnings, highlighting the precariousness of some valuations.