Markets mostly rose Wednesday with traders battling to maintain momentum from the previous day's much-needed rally as they contemplate an extended period of elevated interest rates.
Sentiment has taken a hit in recent weeks owing to a spike in US Treasury yields to around 15-year highs, fuelled by expectations that a strong economy will allow the Federal Reserve to stick to its campaign of monetary tightening.
That has forced investors to push back their expectations of when borrowing costs will eventually come down — just a few months ago, they were betting on a cut by the end of the year.
All eyes are on a planned speech Friday by Fed chief Jerome Powell, with dealers hoping for some clarity on its plans to keep inflation on a downward path and held at the central bank's two per cent target.
Forecasts are for a reiteration of his previous remarks that the goal is taming prices, even with rates already at 22-year highs.
"It's not the height of rates that matters as much as how long they stay high," said Tom Essaye, founder and president of Sevens Report Research.
"If we see Powell hint at higher for longer on Friday, we will need to brace for more equity market volatility."
Investors are also awaiting earnings from Nvidia, which is tipped to post forecast-busting revenue in the second quarter thanks to the surge in demand for its processors used in developing artificial intelligence applications.
The firm's shares have rocketed this year, helping boost many other tech firms, even as traders fret over the impact of higher borrowing costs on their bottom lines.
"The remarkable results it delivered in the previous quarter ignited a surge in the tech sector and generated optimism around artificial intelligence prospects, consequently driving the impressive performance of the S&P 500 throughout this year," said SPI Asset Management's Stephen Innes.
Tech companies are largely susceptible to elevated rates owing to their use of debt to fuel growth.
However, National Australia Bank's Rodrigo Catril said: "There are some concerns the chipmaker may have experienced supply constraints against what seems to be an unquenchable demand for its products.
"Nvidia's performance is seen by many as a potential bellwether for the IT sector and markets in general."
China warning
A rally in Nvidia helped propel gains in global markets earlier this week, though traders could not keep up the buying owing to ongoing rate worries.
While the Nasdaq edged up slightly, the S&P 500 and Dow fell.
Asia fluctuated throughout the morning Wednesday but picked up later on, with most markets slightly higher.
Hong Kong, Tokyo, Sydney, Singapore, Wellington, Mumbai, Bangkok, Jakarta and Taipei were slightly higher, as was London.
Paris and Frankfurt also rose even as data showed the eurozone's economic woes deepened last month.
Shanghai, Seoul and Manila fell.
China's economic woes also continue to fuel risk aversion, with the main cause of worry being its sputtering property sector.
Real estate titan Country Garden — which is drowning in a sea of debt — stands on the verge of default, fuelling worries of contagion throughout the financial system domestically and possibly globally.
While Beijing has introduced some measures to stimulate the economy and support developers, they have been piecemeal and met with a shrug by investors, who are calling for a wide-ranging stimulus.
Alicia Garcia Herrero at Natixis said the best way to help would be to ease tough restrictions imposed on the industry in 2020 to stop speculation and wide-ranging borrowing.
She added: "Chinese policymakers should focus on limiting potential spillovers into the financial sector and thereby systemic risk. The longer they wait to do so, the bigger the cost will be."
