Asian equities are projected to demonstrate resilience today in the wake of a turbulent Wall Street trading session. This volatility was triggered by the bear flattening of the U.S. Treasury yield curve as traders anticipate the Federal Reserve’s pivotal decision due Wednesday. Additional momentum for Asian stocks might be provided by the latest reassurances from China’s Politburo. In a newly released statement, they pledged to bolster their economy by continuing to exercise cautious monetary policy while proactively enhancing domestic demand. This pledge invigorated Chinese stocks trading in the U.S. (American Depository Receipts or ADRs), leading to their outstanding performance. Today, a ripple effect in the form of catch-up pricing is anticipated as market participants process China’s promise of further support.
The positioning ahead of major Central Banks’ verdicts this week may significantly influence price trends before the decisions are unveiled. In the case of the Fed, traders are currently predicting and pricing in a 25-basis points hike, thereby sustaining its tightening stance. Market participants will be keenly awaiting Federal Reserve Chair Powell’s insights on future decisions. Powell has previously stated that such decisions will be based on individual cases and reliant on data. He is expected to allude to the likelihood of an extra rate hike at the following meeting in September. Nevertheless, speculation abounds that this July meeting will mark the final hike of the Fed’s tightening cycle. It is important to note that even a slight hawkish slant could maintain higher U.S. Treasury Yields and a robust dollar ahead of the meeting. Conversely, any dovish leanings could compel participants to settle their bets and safeguards.
