Asian equities may see a positive trajectory as global counterparts exhibited strength in a subdued trading environment. On Wall Street, equities managed to recover some of their recent losses during a Wednesday sell-off, with technical trades and profit-taking influencing price dynamics in a market characterized by low liquidity. Dip buyers appear to be stepping in as market participants consolidate their expectations for a dovish outlook in 2024.
It’s worth noting that trading flows at month-end and year-end will have a significant impact on market dynamics as we approach the close of the year and the holiday season. Market participants are currently busy rebalancing their portfolios and adjusting their exposure to close out the quarter.
On the trade front, reports suggest that the U.S. administration is contemplating raising tariffs on certain Chinese goods, including electric vehicles (EVs), with the aim of protecting U.S. clean energy interests against cheaper Chinese exports. In contrast, the United States is also exploring the possibility of reducing tariffs on consumer goods, potentially leading to deflationary effects. This development underscores the administration’s delicate balancing act in its trade policies.
Looking ahead, market focus is expected to shift towards the Japanese Consumer Price Index (CPI) data. If the CPI rises, it could spark speculation about a policy shift in the January BoJ meeting. On the other hand, a miss in CPI figures could fuel expectations of a policy shift from the Bank of Japan (BoJ) in 2024.
In the U.S., traders will closely monitor the U.S. PCE inflation data, which could serve as a catalyst for risk sentiment. If the data reveals further signs of easing inflation following the recent dovish stance from the Federal Reserve, it might drive up risk assets and weaken the overall strength of the U.S. dollar (USD).
