Asian equities could continue to trade in a defensive mood as global investors watch and reassess the recent COVID restrictions in China due to mass testing amid growing COVID infections. Local reports point to growing fears and stockpiling panic in multiple cities as a weeks-long ultra-strict lockdown could be imposed in a similar scenario to that now taking place in the megacity of Shanghai.
On Wall Street, risk assets recovered from their NY morning lows following some easing in the US Yield curve steepening with the short-term curve pulling back some risk premium of a potential 75 bps rate hike by the Fed. Also, supporting some short-term pricing was the strong downside on the commodities space. Oil prices were on track for their biggest decline in a month as WTI and Brent breached beneath USD 100 a barrel before paring back. The commodity weakness was evident in metals, with the likes of Palladium particularly hit, while Gold traded below the 1900/oz level. Looking ahead, traders will be keeping a close eye on China’s COVID developments as it emerged as a new theme with multiple scenarios for the current strong inflationary cycle and ongoing shocks in supply and demand in many parts of the globe. Also, technical flows will be in play ahead of the last week of the month, before the long awaited FOMC meeting next week.
