Asian equities could trade lower amid a risk-off session on Wall Street, where equities were under pressure due to the rise in US Treasury Yields and a miss on Jobless Claims data, showing that the US job market is hot, bringing back the hawkish positioning in the markets. Traders have also started an early positioning for next Tuesday’s US Consumer Price Index, which, if it shows a flat reading or above, higher US short-term rates by the Fed could drive to a risk-off price action cross-asset.
For the session ahead, participants will be closely watching the inflation trends in China with the CPI and PPI data on the docket. Some desks are still eyeing easier monetary policy from the PBoC in the first half of this year. If inflation shows an uptick, that could provide some headwinds for risk assets as fears the less monetary policy would cause some positioning adjustments. The Yuan could rise against the USD due to the rise in the Chinese short-term rates. A dovish reading could give some tailwinds to equities but put the CNY under pressure as yield differentials with the US could rise.
