Asia-Pacific equities follow suit to the mild gains seen in Wall St peers where the S&P 500 made a new fresh record, and the cyclical and energy sector were leading the sentiment as traders centred their focus on OPEC discussions. Price action was driven by technical positioning with a major data event of the week, the US Non-Farm Payroll Report, on the radar. The USD strengthened against G10FX and EMFX ahead of the change.
On the pandemic front, Thailand reports 5,880 new COVID cases, the largest single-day increase so far. That could put some weight on the sentiment as the Delta variant is reported prompting recent quarantine/lockdowns measures in some APAC countries this week. But some positive news is helping the sentiment as Johnson & Johnson announced positive data on the single-shot vaccine, demonstrating strong results against the delta variant and providing long-lasting durability of response. Also, Australian Scott Morrison will seek a deal with his cabinet today to establish a pathway to end lockdowns and open international travel.
On the commodity camp, Oil traded above USD 76/bbl, the highest level since 2018, as traders are waiting for OPEC+ decision on production cuts, the meeting has been delayed until today, which will take place at 16.30 Vienna time, and the JMMC ended without a recommendation. Higher Oil prices could start a new wave of upside inflation expectations revisions, including China, as it fights against a pickup in inflation due to higher commodity prices and some supply chain bottlenecks. Worth keeping an eye on this theme as the global trade and reponing starts to accelerate in the second half; the market could bring back some inflation hedging positioning on the commodity complex. The USD also will be a lead indicator for the commodity prices as a bearish view is supportive to the commodity complex/trade; a bullish positioning could work as a buffer to higher commodity prices in general.
