Asia bourses could trade on the backfoot as a late session sell-off on Wall Street saw stocks completely erase their earlier gains, with all indices closing in the red. The uncertainty around the new COVID variant is weighing on participants’ sentiment. The heavy selling picked up after the first Omicron case was reported in the US.
The risk assets will focus on regional investors amid growing fear around the inflation and growth for the upcoming quarters as the new variant and a hawkish Fed sooner than expected is causing some repricing, hedging and rebalancing ahead year-end. The US main equity volatility index, the VIX, saw a leg higher, closing above 31 for the first time since January this year. A correction on US risk assets will reverberate on high beta assets as EM currency and equities. The USD and safe haven FX are gaining traction and could be another headwind for global risk assets.
For the session ahead, along with possible risk-off price action, traders will be waiting for the US unemployment claims data, and some Fed policymakers before the awaited FOMC December meeting, which a hawkish Fed expected. The markets’ attention will also be on Friday’s release of US non-farm payrolls.
