Asian markets could trade positively after a stellar performance of risk assets during the US session after a strong pullback on US Bond yields and USD following a softer-than-expected US Consumer Price Index. The data triggered a significant dovish reaction across markets, with the tech sector overperforming due to a decline in rates. Fed rates pricing for the December meeting is now heavily tilted towards 50 bps, with participants now positioning for what could be the peak in inflation and potentially the start of a softer pace in global monetary policy and a weaker dollar. A scenario that could boost emerging markets assets in the coming months.
On the crypto front, investors are watching the space as FTX resolution is yet to be found. Desks pointing for more blood could be seen as retail and institutional investors triggering margin calls. On the macro front, some good potential cues for Chinese assets as the new Politburo committee was calling for a more targeted approach around covid zero. Whilst this doesn’t appear to be a major shift in Zero Covid policy, there is hope the Guangzhou area can avoid a repeat of the Shanghai lockdown from earlier in the year, with a slight downtick reported in the case of numbers yesterday. Expectations for an easing policy could drive more capital flows to Chinese assets as USD and US bond yields pushback from a hawkish Fed.
