Asian shares weaken ahead of US presidential debate; oil at 3-year lows By Reuters

By Ankur Banerjee

SINGAPORE (Reuters) – Asian shares wobbled on Wednesday as investors braced for U.S. inflation data and a hotly anticipated U.S. presidential debate, while oil prices hovered around three-year lows in due to concerns about the weak demand outlook.

Democratic Vice President Kamala Harris and Republican presidential nominee Donald Trump will meet in their first and perhaps only debate, a clash that could prove pivotal in their race for the White House.

Harris’ late entry into the presidential race after President Joe Biden withdrew in July tightened the race, prompting a reversal of trades that had been put in place on expectations of a second Trump presidency.

While the debate, which is due to start at 0100 GMT, is unlikely to influence monetary policy in the near term, investors will be watching to see if either candidate talks about fiscal policies and plans for the economy.

That left investors jittery in Asian hours, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.08 percent. was down 1% in early trading.

“The path to 270 Electoral College votes is shaping up to be a nail-biter,” said Elias Haddad, senior market strategist at Brown Brothers Harriman, referring to the number of Electoral College votes needed to win the presidential election from the USA.

“If Trump is the clear winner of the debate, we expect a slightly stronger USD and higher Treasury yields,” Haddad said, noting that fiscal and trade policies under the Trump presidency are inflationary and could force the Fed to hold rates restrictive for longer.

“If Harris is the clear winner of the debate, we expect an uneven reaction in USD and Treasuries. Fiscal and trade policies under a Harris presidency are less likely to complicate the Fed’s mandate of price stability than under a Trump administration.”

Investors’ focus will then turn to the US Labor Department’s consumer price index report for policy cues, although the Federal Reserve made it clear that employment took a bigger focus than inflation.

Core CPI is expected to have risen 0.2 percent month-on-month in August, according to a Reuters poll, unchanged from the previous month.

While the Fed is expected to cut interest rates next week, the size of the rate cut is still up for debate, especially after a mixed jobs report on Friday failed to provide clarity on which direction the central bank might go.

Markets are currently pricing in a 66% chance that the US central bank will cut rates by 25 basis points, while a 34% chance is assigned for a 50bps cut when the Fed makes its decision on September 18, a showed the CME FedWatch tool.

The greenback remained defensive in early trade, with the yen strengthening to 142.125 per dollar, not far from a one-month high of 141.75 hit last week.

That left , which measures the US currency against six peers, at 101.65. (FRX/)

In commodities, oil prices steadied a bit but remained near three-year lows after OPEC+ revised down its demand forecasts for this year and 2025. (O/R)

Futures were 0.5% higher at $69.54 a barrel. US West Texas Intermediate (WTI) crude rose 0.6% to $66.16 a barrel.