Asia stocks once again started the session trading flat following an uninspired handover from Wall Street with traders positioning for the incoming US Consumer Price Index (CPI) data today. It’s worth keeping an eye on US inflation breakevens, especially at the front-end of the curve, as it is falling with real yields rising ahead of the US inflation data. Given the equities sensitivity to real yields, this could be a factor holding long-duration stocks to rally.
On the trade front, US and Taiwanese trade officials are presumed to meet for trade talks as early as today. The event could prompt Chinese officials’ reaction as China has warned the United States against pursuing a trade deal with Taiwan. And next week, Europe and the US will announce wide-ranging cooperation on technology and trade to oppose China’s ascension. These trade themes might put extra weight on the investor’s sentiment in the coming days as traders have been building some defensive positions ahead of the US inflation data and next week’s last FOMC decision of the quarter.
