Asian equities could trade on the backfoot as Wall Street stocks lead the losses, with investors worried about the sell-off on the crypto markets with Binance now pulling out the FTX buyout deal after “looking at the books”. Risk-off on equities, bonds and FX were seen on global markets, and that should keep Asian-Pacific risk sentiment negative.
On the macro front, China’s Guangzhou locked down another district due to COVID, which puts more pressure on recent risk on flows to Chinese equities. A strong pushback on recent reports noted that Chinese officials would be getting ready to ease the Zero Covid policy. On the rates/inflation front, traders will be closely watching the latest US Consumer Price Index data to see if the Fed could slow down its rate hike size in the coming months. If data shows a beat, equity markets could extend their risk-off price action as US rates would steepen with short-term rates pricing a potential hike of 75 bps (currently in 50bps) in December and higher terminal rates above 5.25% (currently around 5%). After the data, all focus will be on Fed speakers to see their reaction to the data.