Asian stock markets are poised for potential losses in the wake of Wall Street‘s downturn, led by Meta’s underwhelming post-earnings results and the subdued performance of several other large-cap firms. While the Q3 US PCE price data slightly trailed expectations, factors like heightened Initial Jobless Claims and a robust 7-year Treasury auction were unable to halt the indices’ slide by day’s end. Market participants appear to be recalibrating their tech holdings amid a less optimistic outlook for giants like Google and Meta. However, the tech sector has maintained its position as one of this year’s leading performers.
On the FX front, the US dollar showed little movement, even as compelling economic data and stock market underperformance didn’t provide the anticipated lift. This occurred in the face of receding US Treasury yields. On the geopolitical front, all eyes are on a potential invasion at any time as Israel’s Defence Minister confirmed the military’s readiness to commence a ground operation when necessary. As the weekend approaches, traders might reduce risk exposure to hedge against any unforeseen geopolitical developments, given the potential for rapid escalation.
Market participants should closely monitor US Treasury yield movements and related price action. The trading community is on standby for the release of the US Core PCE deflator data and US personal income figures. The week will wrap up with revised figures from the University of Michigan’s sentiment data and inflation forecasts. Despite a general dovish tilt in economic indicators, US Treasuries experienced a surge in buying, probably from short-sellers keen to secure gains ahead of the imminent US PCE and other pivotal events next week. The recent decoupling of US yields and risk-assets correlation is particularly notable. While the data skews dovish, unexpected developments could instigate a bear-steepening trend, potentially dragging risk assets down. Meanwhile, in China, the focus will be on the latest Industrial Profits data to gauge the impact of the country’s recent economic interventions. Reactions to this data might vary due to the diverse risk components in play across markets.
