Asian equities could trade mixed on Wednesday, following a volatile session on Wall Street where the S&P 500 and Nasdaq closed with mild gains following a small beat of 10 basis points on US core CPI data. The initial kneejerk hawkish reaction to the data quickly unwound as the whole inflation report was seen as lacking anything to convince Fed officials that more rate hikes are needed. This was despite the larger jump in the headline figures, which were unsurprisingly driven by energy price increases.
The bond and FX space remains a leading indicator, as traders will be waiting for more US data this session – retail sales and PPI – as well as the ECB meeting, which is expected to hike by 25 basis points. The European event could add a bit of caution before any extended risk-on trade.
The dovish trade after the US CPI data helped EMFX peers outperform the USD, and the Treasury curve flattening also helped EM with some buying flows on the bond space and equities. This could work as a risk buffer for traders looking to add a bit of risk or unwind some hedges. It is also worth noting that price action could be affected by rollover and technical traders ahead of tomorrow’s Quadruple Witching expiry in the US and Europe.
