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Nvidia to set the tone

FILE PHOTO: Illustration shows NVIDIA logo

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets.

Equity markets across Asia are likely to rise on Thursday, assuming the initial gains in Nvidia shares in after-hours U.S. trading on Wednesday following the company's fourth-quarter earnings are sustained.

The U.S. chip-making and artificial intelligence giant won't be the only influence - traders in Asia have on their plate PMI reports from Japan, Australia and India; inflation data from Hong Kong; and South Korea's latest interest rate decision and guidance.

They will also have the chance to digest the U.S. Fed's January meeting minutes that showed policymakers were concerned about the risks of cutting interest rates too soon, and a spike in U.S. bond yields following an extremely weak 20-year auction.

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But for stocks, at the open at least, it will be all about Nvidia. Fourth-quarter revenue beat forecasts and the first-quarter outlook also exceeded analysts' expectations. Its shares rose 7% after the bell on Wednesday, but trading was extremely volatile.

The recovery in Chinese stocks from recent five-year lows, meanwhile, continues. The Shanghai Composite and CSI 300 index of blue chip shares both gained around 1% and chalked up their longest winning streaks in over a year.

Another up day on Thursday will seal their best runs since July 2020. The CSI 300 is now in the green for the year and the Shanghai Composite is creeping into positive territory.

While investors have responded favorably to Beijing's efforts to prop up the market, inject liquidity into the banking system and boost economic activity, how long that positivity lasts is an open question.

The latest market measure, reported by Bloomberg on Wednesday, is a ban on major institutional investors reducing equity holdings at the open and close of each trading day.

Japan's Nikkei, meanwhile, continues to pause for breath at its recent lofty 34-year heights just below 39,000 points, as dollar/yen consolidates around the 150.00 level.

Japan's purchasing managers index reports on Thursday could reveal whether the economy is any closer to exiting recession. Manufacturing activity has contracted every month except one since October 2022.

Japan's government on Wednesday downgraded its view on the economy for the first time in three months on sluggish consumer spending, suggesting a bumpy path out of a recession in the face of slow wage recovery and lackluster industrial output.

The Bank of Korea will keep its key policy rate on hold at 2.50% for a ninth consecutive meeting, according to all economists polled by Reuters, who stuck to their long-held view the first rate cut will be in the third quarter.

Money markets indicate one 25-basis point rate cut will be delivered by August, and another by the end of the year.

The won has weakened 3% against the U.S. dollar so far this year, but has strengthened 3% against Japan's yen.

Here are key developments that could provide more direction to markets on Thursday:

- Australia, India, Japan PMIs (February)

- South Korea interest rate decision

- Hong Kong inflation (January)

(By Jamie McGeever; Editing by Josie Kao)