Asian equities could trade with choppy price action following mild losses on Wall Street with traders active in quarter-end trade. Adding to that was a tumble in U.S. Treasury yields, and lower oil prices as desks weighed U.S. President Biden’s proposed federal fuel tax cut. At the same time, a Fed research paper noted that the U.S. economy is facing elevated risks of a recession over the next two years. As participants are now pricing a late cycle phase, demand for equities could be limited short-term due valuation reassessments.
There will be no major calendar risk for the session ahead, but the month-end trade could keep weighing on price action, especially equities. On the policy front, traders will be eyeing the second day of Fed Chair Powell’s testimony in the Congress, as it reiterated much of his usual tone. Still, he did say he will never take anything off the table when asked about a 100bps rate hike, reaffirming his hawkish statements, but added additional rate hikes are priced in by the markets, which is appropriate.
