Asian equities could trade in a defensive mood, with recessionary fears now weighing a bit on price action after mixed US economic data and companies providing cloudy guidance on US consumers. Sentiment declined after reports citing a Chinese adviser noting a likely downgrade in the 2023 GDP growth target, which pressured cyclical names and EM peers. Traders could stop the rally due to uncertainties with the economic outlook discounting moderate central bank hawkish talks. However, there are still questions around the terminal rate for the Fed, with desks now calling it at 5.25%, despite current market pricing.
On the macro front, it is worth keeping an eye on the commodity sector and the Chinese Yuan as it continues to be weighed on by the uncertainty wrapping China’s rising COVID cases and potential further lockdowns. On the geopolitical front, tensions between Poland and Russia are getting cold now which could help to ease selling pressure on risk assets. Officials from Poland, US and NATO noting that there wasn’t any evidence that was a direct attack from Russia on a NATO member.
