Asian equities might exhibit a steady performance as traders are influenced by Wall Street‘s mixed session, looking forward to a week filled with significant economic data and month-end trading activities. As we approach December, it’s important to note that short-term price movements are heavily impacted by technical trades. Currently, the bond and USD markets are somewhat lagging. However, the upcoming US Treasury Bond auction, featuring a $39 billion 7-year bond offering, is expected to attract considerable attention. This event, coupled with the anticipation of increased end-of-month buying, particularly in months that involve bond refunding, could influence market dynamics. If bond yields continue to ease, we might see an accelerated pace of dollar selling as the month ends.
The Chinese Yuan has shown minor weakness against the Dollar following a decline in industrial profit growth, suggesting the potential for further economic stimulus measures. The People’s Bank of China (PBoC) has launched initiatives to increase financial support for private companies, encouraging banks to set specific lending targets for this sector. Despite these challenges, the PBoC’s Q3 monetary policy report maintains a positive outlook on achieving China’s growth target of about 5% for 2023, highlighting the importance of managing market expectations to avoid a one-sided and self-reinforcing outlook.
Looking ahead, major risk events this week include the release of US GDP data and Personal Consumption Expenditures (PCE) on Wednesday, alongside a speech by Federal Reserve Chair Powell. These releases could heighten market volatility during month-end trading activity. Despite this, there is still optimism for an equity rally, especially if the data indicates a softening trend ahead of the Federal Reserve’s final rate decision of the year.