Asian equities could trade positively following a risk-on trade on Wall Street, where equities extended their winning streak to a remarkable seventh day, setting a record not seen in over two years, as big tech names like Microsoft led a robust rally, undeterred by Federal Reserve officials’ hints at maintaining hawkish monetary policies. This tailwind for tech could be felt in Asia today, and it could accelerate if US Treasury yield eases further as the macro agenda is light, bringing little to change short-term flows.
Taking the global flows seasonality into short-term price action, as the earnings season is winding down, there could be a significant flow shifting to risk assets going into December as buyback window is open and the main market theme is that a substantial rally in global equities could come in 2024. So short-term positive price action could be provided the Fed adjusts its policy stance to prevent a recession. Today, it is worth keeping a close eye on the Federal Reserve’s narrative, which will remain a focal point with a line-up of speakers, all paving the way for Chair Powell’s imminent address later today. The overall tone skewed hawkish as some members recently emphasized the Fed’s reliance on economic data over speculative rate cut discussions, and others advised against premature rate decisions. The US curve dynamics could drive the price action direction ahead of the event. Further easing on US rates could boost risk assets ahead of Fed’s Powell speech.
On a cyclical note, the sector could outperform as a firmer dollar puts pressure on the Antipodean currencies, and precious metals feel the weight of the dollar‘s climb. Energy markets saw a decline in oil prices, with WTI and Brent crude experiencing a drop in an extension of a weaker demand outlook, particularly from China.
