By Jamie McGeever

A look at the day ahead in Asian markets from Jamie McGeever.

An expected interest rate hike in New Zealand will be the main regional focus for Asian and Pacific markets on Wednesday, as another day without agreement in Washington over the U.S. debt ceiling looks certain to sour global investor sentiment.

Wall Street ended sharply lower on Tuesday and U.S. yields spiked higher - a 21-day T-bill auction drew a high yield of 6.2% and the one-month bill yield surged to historic highs of 5.888% - as an unprecedented potential U.S. default drew closer.

There had been positive noises in recent days from both sides of the discussions in Washington, but the upshot is no agreement has been struck.

Markets have mostly shrugged off the impasse - after all, Congress has acted 78 times to permanently raise, temporarily extend, or revise the definition of the debt limit since 1960.

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

U.S. and global economic indicators, however, have been surprisingly upbeat lately, as broadly highlighted by the flash purchasing managers index reports for May. The feel-good factor around Japan continues - manufacturing is growing for the first time in seven months and service-sector growth is at a record high.

The main event in Asian hours 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 go higher than previously thought in the wake of last week's stimulatory budget.

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

Investors will also be keeping tabs on U.S.-China trade relations, which appear to be deteriorating by the day into tit-for-tat ban and counter ban in the chips and cybersecurity sectors.

A top congressional figure said on Tuesday that the Washington should add Chinese memory chip maker Changxin Memory Technologies (CXMT) to a trade blacklist after Beijing this week banned the sale of some chips by U.S.-based Micron Technology Inc (MU.O).

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

- New Zealand interest rate decision

- UK inflation (April)

- Germany Ifo business climate index (May)

(By Jamie McGeever)