SINGAPORE: Chinese markets lifted Asian stocks on Wednesday on optimism over steps taken by policymakers to boost confidence, while looming earnings from Nvidia kept investors on edge following the recent frenzied AI-driven global rally.
Financial markets will also look out for the minutes of the Federal Reserve's last meeting in January for further clues on the policy outlook as expectations of early U.S. interest rate cuts dissipate in the wake of sticky inflation data.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.62% on Wednesday, touching their highest in seven weeks, with stocks in China and Hong Kong providing the biggest boost.
The blue-chip CSI300 index rallied 1.8%, while Hong Kong's Hang Seng Index surged 3%, a day after the biggest ever reduction in the nation's benchmark mortgage rate as authorities stepped up efforts to prop up the struggling property market.
"Regulators are cautious and taking a gradual approach, with the possibility of introducing further measures if needed," said Jian Shi Cortesi, Investment Director, Asia/China Growth Equities of GAM Investments.
"The market sentiment has improved slightly, but the sustainability relies more on improvements in economic activities and corporate earnings."
China's stock exchanges on Tuesday said major quant fund Lingjun Investment had broken rules on orderly trading and barred it from buying and selling for three days, as part of wider regulatory measures to revive market confidence.
Over in Japan, Tokyo's Nikkei closed down 0.26%, having stuttered in the last few days within sight of the all-time high set in 1989, as nervousness ahead of Nvidia earnings grip investors.
Nvidia stumbled on Tuesday, dropping 4% and pushing the tech-heavy Nasdaq nearly 1% lower. Nasdaq futures were 0.26% lower, while futures for the S&P 500 eased 0.14%.
European bourses are set for a subdued start, with Eurostoxx 50 futures up 0.02%, German DAX futures down 0.04% and FTSE futures 0.14% lower.
Europe's benchmark stock index remains near its highest in two years and is eyeing the record high touched in January 2022.
FED MINUTES
On the monetary policy front, traders will get a chance to assess minutes of the Federal Reserve's last meeting later in the day for any further clues on when the U.S. central bank will start its easing cycle.
Data last week showed sticky U.S. inflation, prompting investors to push back expectations of an early start to the rate-cut cycle. Markets are now pricing in June as the starting point for easing, compared with March at the start of the year.
A slim majority of economists polled by Reuters expects the Fed to cut interest rates in June.
Markets now expect 92 basis points of cuts from the Fed this year, closer to Fed's own projection of 75 bps of easing and sharply below the 150 bps of cuts priced in by traders at the start of the year.
The changing rates outlook has buoyed the dollar this year and kept the yen, which is extremely sensitive to U.S. rates, near three-months low.
The yen was at 149.95 per dollar, anchored to the key 150 level for the past few days, keeping traders on the watch for intervention from Japanese officials.
Japan's exports rose more than expected in January, helping ease some concerns about demand and output after data last week showed the economy unexpectedly tipped into recession in the fourth quarter.
Against a basket of currencies, the dollar index eased 0.067% to 103.97, inching away from the three-month high of 104.97 it touched last week.
In commodities, U.S. crude rose 0.43% to $77.37 per barrel and Brent was at $82.72, up 0.46% on the day.
Iron ore futures were rooted to their lowest level in over three months, weighed down by mounting concerns over the demand outlook in top consumer China.
Spot gold added 0.4% to $2,031.55 an ounce. - Reuters
