By Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks wobbled on Wednesday as investors gear up for U.S. inflation data and an eagerly awaited U.S. presidential debate, while oil prices loitered around three-year lows on concerns over a weak demand outlook.
Democratic Vice President Kamala Harris and Republican presidential candidate Donald Trump will meet in their first and perhaps only debate, a clash that could prove pivotal in their battle for the White House.
Harris’ late entry in the presidential race after President Joe Biden’s withdrawal in July tightened the race, prompting a reversal of trades that were put in place on expectations of a second Trump presidency.
While the debate, due to start at 0100 GMT, is unlikely to sway near-term monetary policy, investors will keep an eye on whether either candidate talk about fiscal policies and plans for the economy.
That has left investors skittish in Asian hours, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.08% lower. Japan’s Nikkei fell 1% in early trading.
“The path to 270 electoral college votes is shaping-up to be a nail-biter,” said Elias Haddad, senior markets strategist at Brown Brothers Harriman, referring to the number of electoral college votes needed to win the U.S. Presidential election.
“If Trump is the clear winner of the debate, we expect a slightly stronger USD and higher Treasury yields,” Haddad said, noting fiscal and trade policies under a Trump presidency are inflationary and could force the Fed to keep rates restrictive for longer.
“If Harris is the clear winner of the debate, we expect uneven reaction in USD and Treasuries. Fiscal and trade policies under a Harris presidency are less likely to complicate the Fed’s price stability mandate than under a Trump administration.”
Investor focus will then switch to U.S. Labor Department’s consumer price index report for policy clues although the Federal Reserve has made it clear employment has taken on a greater focus than inflation.
The headline CPI is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month.
While the Fed is widely expected to cut interest rates next week, the size of the rate cut is still up for debate, especially after a mixed labour report on Friday failed to provide clarity on which way the central bank could go.
Markets are currently pricing in 66% chance of the U.S. central bank cutting rates by 25 basis points, while 34% chance is ascribed for a 50 bps cut when the Fed delivers its decision on Sept. 18, CME FedWatch tool showed.
The dollar remained defensive in early trading, with the yen strengthening to 142.125 per dollar, not far from the one-month high of 141.75 touched last week.
That left the dollar index, which measures the U.S. currency against six peers, at 101.65. [FRX/]
In commodities, oil prices stabilized a bit but still hovered near their lowest in three years after OPEC+ revised down its demand forecast for this year and 2025. [O/R]
Brent crude futures was last 0.5% higher at $69.54 a barrel. U.S. West Texas Intermediate (WTI) crude rose 0.6% to $66.16 a barrel.
