Asian equities could trade mixed today following a sideways trade on Wall Street that was initially boosted by a renewed flow from meme stocks and cryptocurrencies. It is worth keeping track of the geopolitical landscape as any major developments on the China/Taiwan front could impact overall risk demand. China confirmed it would extend military drills around Taiwan, and the military will conduct “regular” exercises on the eastern side of the median line of the Taiwan Strait. Any miscalculation could lead to a broader de-risk event with a strong outflow from the region’s equities and US dollar demand.
On the macro front, traders are now keeping a close on Wednesday’s US Consumer Price Index report after the strong jobs data last Friday, which brought some volatility to the US rates markets. Nevertheless, the latest NY Fed Consumer survey was encouraging, with the 1 and 3-year inflation expectations easing from the prior month. But the hawkish tone from Fed speakers will be key ahead and after the CPI report. Recently Fed Daly said the Committee “is nowhere near done on its fight against inflation and a 50bps hike is not the only option to consider.” Participants could decide to hold bets on risk assets until the report.
