*

Investors await pivotal Nvidia ( NVDA ) earnings after Fed drama

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Fed independence under threat, leads Treasury yields to

steepen

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Dollar under pressure on rate-cut wagers

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French political crisis back in focus

(Updates to Asia afternoon)

By Ankur Banerjee

SINGAPORE, Aug 27 (Reuters) - Asian stocks meandered on

Wednesday ahead of an earnings report from AI leader Nvidia ( NVDA )

that will shape near-term risk sentiment, while the

U.S. dollar wobbled as investors remained nervous about attacks

on Federal Reserve autonomy.

European futures indicated a higher open but

investors are likely to take a dim view of the political drama

in France after Prime Minister Francois Bayrou's gamble to win

backing for his deeply unpopular debt-reduction plan backfired.

The latest political turmoil comes after France lost its

last prime minister, Michel Barnier, to a no-confidence vote

over the budget in late 2024, after just three months in office.

Meanwhile, the U.S. Treasury yield curve has been steepening

since President Donald Trump on Monday ordered the firing of

Federal Reserve Governor Lisa Cook, an unprecedented move that

could lead to a legal tussle after a lawyer for Cook said she

will file a lawsuit to prevent it.

"The Fed has said it will abide by any decision the court

makes on Lisa Cook but the reality is the Fed is in a bind,"

said Prashant Newnaha, senior Asia-Pacific rates strategist at

TD Securities.

"If the court ends up ruling in favour of Trump, this

potentially puts Chair (Jerome) Powell in line to be fired for

permitting a non-Fed employee to make decisions on behalf of the

Fed Board" should Cook continue to serve between Trump's firing

and the court's decision.

The yield on the two-year note, which typically

moves in step with interest rate expectations, hit its lowest

since May at 3.654% but was last up 1.8 basis points at 3.661%.

The yield on the 30-year note was 1.4 bps higher at

4.922%.

Trump has repeatedly criticised Powell and policymakers for

not cutting interest rates. Market watchers interpreted Powell

comments last week as indicating cuts could be on the way.

That has led to investors wagering a cut next month, with

traders pricing in an 84% chance of the Fed moving in September

and expecting more than 100 bps of easing by June.

The dollar staged a small recovery in Asian hours after

dropping in the previous session. The euro eased 0.2%

at $1.161825, while the yen weakened to 147.87 a dollar.

"I think investors are focused more on the upcoming payroll

print and what that means for a September rate move," said Ben

Bennett, APAC investment strategist at Legal and General

Investment Management.

"The hope is that a rate cut is still on the cards without a

sharp deterioration in the labour market. Tonight's Nvidia ( NVDA )

results will also be important for the near-term direction of

markets."

Data showed options traders are pricing in about a $260

billion swing in Nvidia's ( NVDA ) market value after the firm reports

earnings, where its business in China will be in focus following

an unusual profit-sharing deal with the Trump administration.

Caught in the crossfire of a Sino-U.S. trade war, the fate

of Nvidia's ( NVDA ) China business hangs on where the world's two

largest economies land on tariff talks and chip trade curbs.

MSCI's broadest index of Asia-Pacific shares outside Japan

was little changed. Chinese stocks though remain

on the charge with the blue-chip stock index hitting a

three-year high, buoyed by tech sector.

In commodities, spot gold was 0.47% lower after

hitting a two-week high in the previous session.

Oil prices steadied after falling in the previous session,

as the market watched for fresh developments in the Ukraine war

and investors weighed hefty new U.S. tariffs on India, the

world's third-biggest crude consumer.

Brent crude futures rose 5 cents to $67.27 per

barrel, while West Texas Intermediate crude futures were

up 3 cents at $63.28.