Asian equities might exhibit a mixed performance today, yet the technology sector could witness a positive trend, following Wall Street‘s gains yesterday, mainly driven by a surge in tech stocks. This optimism was sparked by impressive earnings from Taiwan Semiconductor Manufacturing and an upgraded outlook for Apple by Bank of America. Despite this buoyant stock market trend, U.S. Treasury bonds yields showed resilience during the afternoon rally. A noteworthy aspect was the steepening of the Treasury yield curve, characterized by a stable two-year yield and a rise of four basis points in the ten-year yield. This shift came after an unexpected decrease in U.S. jobless claims earlier in the day. Given the current sensitivity of risk assets, especially emerging market stocks, to change in US Treasury yields, traders should closely monitor these yield levels in this session.
Looking forward, the market’s attention is turning towards the upcoming University of Michigan Consumer Sentiment Index for January and statements from Federal Reserve officials Daly and Barr, before the blackout period preceding the January meeting. The release of Japan’s national core CPI data is also under the spotlight. A significant deviation from expectations could exert pressure on Japanese Government Bonds (JGBs) ahead of next week’s Bank of Japan policy decision, although it’s unlikely that today’s CPI figures will prompt an immediate policy shift. In the U.S., the University of Michigan’s reports on consumer sentiment and inflation expectations, coupled with existing home sales data, are expected to draw substantial interest, with a keen market focus on US yield movements. Additionally, short-term market dynamics might be influenced by technical trades in this session, particularly considering the US option expiry and the hovering of US equities around year-to-date highs. It is worth adding that the geopolitical scene is volatile, keeping a close eye on Gold, Oil and also the USD trends ahead of the weekend would be a safe play tensions including further US strikes on Houthi targets and Pakistan striking Iran in retaliation is on the risk radar.
