An expected interest rate hike in New Zealand will be the main regional concern for Asia-Pacific markets on Wednesday, as another day without a deal in Washington on the US debt ceiling is likely to tarnish global investor sentiment.

Wall Street closed sharply lower on Tuesday and US yields soared: A 21-day Treasury bill auction yielded a high yield of 6.2% and the one-month yield hit all-time highs of 5.888%, as the possibility of an unprecedented increase. The default of the United States is coming.

In recent days there have been positive noises from both sides of the discussions in Washington, but no agreement has been reached.

Markets have mostly ignored the showdown; After all, Congress has acted 78 times to permanently increase, temporarily extend, or revise the definition of the debt limit since 1960.

But now they are reeling, and if Treasury Secretary Janet Yellen is right, the government will run out of cash next Thursday.

However, US and global economic indicators have been surprisingly upbeat of late, as the Flash Purchasing Managers’ Index reports for May show. The confidence climate in Japan continues: the manufacturing sector registered its first growth in seven months and the growth of the service sector reached a record level.

The main event in Asia on Wednesday will be the Reserve Bank of New Zealand’s expected 25 basis point hike to 5.50%, but the focus will be on whether rates will be higher than expected following the stimulus budget from last week.

On the other hand, after surprising financial markets with a 50 basis point rise to 5.25% in April, the RBNZ is also under pressure to moderate its pace of tightening as the economy teeters on the brink of collapse. recession.

Investors will also be watching the US-China trade relationship, which appears to be deteriorating by the day, with bans and counter-bans in the chip and cybersecurity sectors.

A senior congressional official said Tuesday that Washington should add Chinese memory chipmaker Changxin Memory Technologies (CXMT) to a trade blacklist after Beijing this week banned the sale of certain chips from US firm Micron Technology Inc. MU.O).

Here are three key events that could guide markets on Wednesday:

– New Zealand Interest Rate Decision

– Inflation in the United Kingdom (April)

– Ifo business climate index in Germany (May)