Asian equities begin the session trading flat. The region only somewhat benefits from the moderate tailwinds from Wall Street, where the S&P 500 posted fresh record highs after a dovish European Central Bank more than offset a stronger US Consumer Price Index print. Participants reasoned that the data, while above consensus, was not too surprising given the volatility of inflation data lately. Yesterday’s price action showed that US inflation is still not sufficient to break away from the transitory factors narrative. From now on, traders will be watching whether transitory inflation passes through into more substantial persistent inflation. Wage increase and long-run inflation expectations should remain to be in focus.
The upside in the US equity complex was most intense in long-duration names as the tech and growth sectors, finding further support from a decline in real yields, seeing a widening of inflation breakevens after recent heavy narrowing, coming on the back of the CPI data. Today has a very quiet macro calendar, and the Asian session is set to be ruled by technicals and positioning factors ahead of next week’s FOMC decision.
