Asia equities are trading mixed after a choppy price action on Wall Street as markets digested the U.S. Consumer Price Index data, which printed its highest in around four decades, in line with expectations, but eased some hot inflation fears. Some soft defensive flow is seen in some assets classes, with the Japanese equities underperforming on stronger Yen and COVID woes.
On the COVID front, in Japan, reports note Tokyo will raise its COVID-19 alert level to the second highest. However, market reactions to the Omicron wave have been moderate, worth paying attention to worries that further impacts in the global supply chains could trigger a risk-off price action. The big macro theme and narrative for the year for Asian equities and credit markets will be the monetary policy and inflation in the U.S., as a hawkish acceleration from the FOMC could drive technical outflows from local assets. With that in mind, today’s risk events for the session will be the U.S. Producer Price Index with comments expected from Fed’s Brainard, Barkin and Evans on the monetary policy path.