Asian markets may adopt a cautious stance following a mixed session on Wall Street, with the tech sector’s robust performance potentially providing a positive momentum for related sectors in the region. Investors remain vigilant as the US debt ceiling saga unfolds, with market expectations hinging on the so-called ‘x’ date, liquidity conditions, credit ratings, and forward-looking macroeconomic guidance to steer short-term trading decisions. A silver lining emerged with US House Speaker McCarthy committing to weekend work at the Capitol to push forward debt ceiling negotiations, implying an increasingly probable resolution.
On the geopolitical landscape, Russia and Belarus Defense Ministers sparked controversy by signing an agreement concerning the deployment of tactical nuclear weapons in Belarus. Russian Defense Minister Shoigu controversially stated that the West is waging an undeclared war against Russia and Belarus. In the APAC region, focus is set on Tokyo’s Core CPI data release on Friday. With market participants dissecting the latest figures, the anticipation of a potential BoJ rate hike could intensify. Subsequently, traders will turn their attention to key US economic indicators including the Core PCE Price index data, durable goods, personal income, and the University of Michigan sentiment and inflation expectations figures. With the upcoming FOMC meeting on the horizon, the money markets are currently split, pricing in an equal chance for a rate hike or a hold. It’s worth noting that markets will shutter early on Friday due to the impending Memorial Day holiday on Monday. This could trigger some risk-off flows in anticipation of the long weekend, owing to uncertainties surrounding US debt ceiling discussions and end-of-month trading adjustments next week.
