Asian stocks set to edge lower ahead of US Fed chair’s policy speech

Asian stocks are expected to open slightly lower on Friday (August 28) as investors anticipate US Federal Reserve Chair Kevin Warsh's speech in Jackson Hole. The speech may bring a hawkish tone, according to some analysts. Equity-index futures for South Korea and Hong Kong indicate initial declines, while those for Japan remain flat.

US stock contracts slightly decreased after tech shares rallied on Wall Street, following Nvidia's bullish outlook. Nvidia's stock surged nearly 9 percent, marking its most significant increase since April 2025.

In contrast, US Treasuries declined for a second consecutive day, with yields rising two to three basis points across the curve. This trend occurred ahead of Warsh's remarks, as investors seek clues on whether the recent bond yield rise will continue. They are also looking for insights into the Federal Reserve's approach to balancing inflation pressures and signs of a cooling US economy.

Warsh's speech will play a crucial role in determining the future direction of bond yields, with investors closely monitoring the Fed's policy stance. "If he does not give any framework guidance, the risk is that it will involve a much higher move in long rates," Torsten Slok, chief economist at Apollo Global Management, commented to Bloomberg Television.

Traders also assessed recent developments, such as a drop in US jobless claims and rising wholesale inventories. However, the merchandise trade deficit widened in July to its largest level since early 2025. Despite this, Kansas City Fed President Jeff Schmid stated that monetary policy is not restraining the economy.

Federal Reserve policymakers maintained the federal funds rate within the range of 3.5 to 3.75 percent at their latest meeting. Futures pricing suggests a potential quarter-point increase by year-end. "Clear policy signal will likely be scarce given Warsh’s reluctance to provide forward guidance," stated Elias Haddad at Brown Brothers Harriman & Co. Warsh may instead preview the Fed's five task forces' early findings on communications, the balance sheet, economic data, productivity, and jobs, as well as inflation frameworks.

Although US technology stocks experienced a rally due to Nvidia's optimistic outlook, leading to an increase in major indexes, all other sectors in the US market declined. While concerns over the sustainability of AI spending may persist and contribute to volatility in the tech sector, increased investment in the industry could further fuel inflation and upward pressure on bond yields.

"As is usually the case when tech ramps, the group is sucking oxygen from the rest of the market," Vital Knowledge founder Adam Crisafulli wrote in a note, adding that accelerating AI growth creates upside risk for yields.