Asian equities traded with a positive bias following the similar performance stateside where the S&P 500 and Nasdaq 100 notched fresh record highs. Nevertheless, the Dow Jones Index and financials lagged alongside a decline in US Treasury Yields as participants digested firmer but not runaway inflation. Some desks are now expecting the coming inflation data to print above the expectations. Nikkei 225 traded down, with sentiment dented by a firmer FX and after a surprise contraction in Machinery Orders which declined by the fastest pace M/M since April last year. Hang Seng and Shanghai Composite were positive amid strength in the blue-chip tech names following the recent talks with China’s market regulator whereby internet platform firms pledged to avoid anti-competitive behaviour.
In Wall Street, value and cyclical sectors outperformed in the session. Nasdaq traded weaker due to some sector rotation flow and selling pressure in the afternoon after Coinbase, with investors locking some profits after its 52% upside on the first day of trade. Investment bank divisions saw strong performance: JPMorgan traded lower on the lacklustre net interest income/loan demand outlook. Wells Fargo found strength after noting its fiscal year net interest income would be closer to the top end of the prior guidance range. Goldman Sachs climbed after a solid performance across all divisions. Fed Kaplan, Williams and Powell spoke today but did not reveal anything too new on the Central Bank front. Fed’s Clarida reaffirmed the Fed’s dovish stance, stating that they expect similar sequencing regarding reducing bond purchases versus hiking rates as in the 2014-2015 cycle. Later this month, traders will keep their eye on the FOMC meeting, looking for any changes on the Summary of Economic Projects (SEP) and Chair Powell speech after the decision waiting for any hint of when the Fed could start tapering its QE program. Participants now look to today, where Retail Sales, Jobless Claims, and Philly Fed are expected to see tailwinds from the recent extraordinary fiscal stimulus.
