Shares turn cautious ahead of Warsh speech; FX, bonds hold breath

Asian shares showed caution on Friday following a technology rally led by Nvidia, while global currency and bond markets awaited comments from the U.S. Federal Reserve's chair, Kevin Warsh. Oil prices faced a weekly decline as Iran and Oman agreed to manage traffic in the Strait of Hormuz and share revenues, although the U.S. showed little interest in restarting direct talks with Tehran.

Brent crude oil prices fell 0.1% to $89.63 a barrel, but were expected to drop over 5% weekly. The MSCI's Asia-Pacific index outside Japan saw a slight gain of 0.1%, while Japan's Nikkei rose 0.5%. Taiwanese shares climbed 1.2% after Nvidia's robust results and hint of a lasting AI spending boom. South Korea's KOSPI fell 1%, and Hong Kong's Hang Seng dropped 0.3%.

Futures for the S&P 500 and Nasdaq were off 0.1%, while EURO STOXX 50 futures increased 0.3%. All eyes were on Warsh's speech at the Federal Reserve's Jackson Hole Symposium where he would discuss U.S. interest rates. Three Fed officials had already warned about persistent inflation, but Warsh resisted offering forward guidance on rate hikes.

While markets do not expect him to provide guidance, they hoped he would ease uncertainty about the Fed's reaction. Analysts at ANZ noted that markets could react adversely if Warsh provides too little information. Long-term yields rose after the Fed's July meeting, as Warsh was seen as not addressing inflation adequately. He was presiding over a divided Fed with several policymakers pushing for interest rate hikes to control price pressures.

On Friday, 30-year Treasury yields were steady at 5.1973%, down 8 basis points this week, while 10-year yields held at 4.6723%, down 7 bps. Two-year yields remained steady at 4.2279%. The U.S. dollar was stable against major peers at 99.12, up 0.3% for the week, while the Australian dollar hit a three-month high of $0.72 and was poised for a weekly rise of 0.4%.