Asian equities could trade on the backfoot as global equities traded lower. On Wall Street, steady selling flows hit the tape on major indexes, with the S&P500 trading -1.4% and NASDAQ -2%. Some equities exposure is being adjusted with US earnings on the docket. A major driver for the risk-off was an upside in yields US Treasury Yield, with Fed’s Daly and Powell adding weight to the 50bps hike argument for the next FOMC meeting. Fed Bullard also weighs in on hikes stating that the “world would not end” if Fed announced a 75bp hike. Bullard expressed the sentiment that the “bond market is not looking like a safe place to be” while the Fed “should avoid disruptions from surprise market moves.”
It is worth keeping an eye on the FX space as the USD continues to gain ground against all major and EM pairs with the fast rice on US yields. The downside move on the Yen and Yuan continues to be highly correlated. Foreign investors’ outflows from Chinese markets, low growth expectations due to COVID restrictions, and more easing from the PBoC are also weighing on both currencies’ volatility. Markets will turn their focus to a swathe of flash manufacturing and services PMIs, first for Australia and Japan before key European readings. Traders will be keeping a close look on market repricing amid US earnings and Fed’s blackout that starts late today.
