Asia equities started the session on the backfoot, following suit to the losses on Wall Street where growth/long-duration assets as tech underperformed amid higher U.S. Treasury yields and financials were also hit by disappointing major bank earnings. Not a clear drive to point session, although worth noting that the bond/equity sensitivity has played a major role in the markets since the start of the year. Another underlying factor is next week’s FOMC meeting and some updates from Fed speakers on current market pricing, which shows a high probability of four 25bps quarterly rate hikes starting at the March meeting.
For the session ahead, traders could keep preferring defensive plays ahead of next week’s Fed meeting. On the radar, the energy sector could get some boost as WTI still settled nearly 2% up on a day as the bullish price action was supported by a Houthi rebel drone attack on a key oil facility in Abu Dhabi whilst continued Russia-Ukraine tensions could keep adding to the upside pressure. On the macro front, there is no major data to be released in the session so that the trade could fluctuate around bond/equities dynamics, the Russia-Ukraine situation and traders eyeing a hawkish FOMC next week.
