Asian equities may be poised for a downturn today, prompted by Wall Street‘s risk-aversion behaviour. Notably, sectors sensitive to technology and rates – such as Communications, Consumer Discretionary, and Technology – may experience increased pressure due to anticipated technical trading as we approach the month and quarter-end. Moreover, sectors like energy could surge ahead due to strategic profit-taking actions following their recent standout performance when compared to their cyclical counterparts. It’s significant to mention that a sense of caution prevails among investors with respect to the global economy’s trajectory over the forthcoming months. The threat of a potential recession during a high-interest rate cycle, enforced by Central Banks, could significantly impact both the US and Europe, thereby influencing global trade, financing conditions, and demand.
The past weekend was marked by heightened geopolitical tension due to the Wagner Group’s transient coup attempt. Although the situation has subsided, any subsequent insurrection against Russia remains a potential cause for concern, potentially triggering a defensive reaction in safe-haven assets. The foreign exchange market might be susceptible to volatility due to quarter-end price adjustments and global portfolio rebalancing across diverse asset classes. The possibility of FX intervention concerning the Yen has re-emerged in light of concerns over its recent depreciation. The Japanese government has emphasized the crucial role of forex stability, which indicates that any unexpected volatility in the JPY could catalyse a sell-off of the USD. Market participants might be prompted to realign their exposure, anticipating possible FX market intervention from the Bank of Japan and the Japanese government.
