Asian equities are trading on the backfoot following the hawkish headwinds from Wall Street, including 40-year high Consumer Price Index inflation and Fed’s Bullard leaning towards a 100bps rate hike by July 1st. Market’s defensive flows were exacerbated in the afternoon after Fed’s Bullard voiced his consent for a 50bps rate hike and 100bps of tightening by July, which would also imply a 50bps hike in May.
For the session ahead, hawkish headwinds from the US could keep traders looking to adjust their portfolios and macroeconomic scenarios, reviewing its exposure within the value and growth sector as US 10 year Treasury yield rose above 2%. Worth keeping a close eye on Real Estate, Tech and utility sectors in ASIA-PAC as the sectors could feel some pressure influenced by higher global yields influenced by the US credit markets. Participants will be digesting some mixed narratives from major central banks, with ECB policymakers pushing back on a hawkish approach short-term, some FOMC speakers supporting a tighter policy and others not so keen on a faster pace for now. With inflation hotter, this creates some political issues for G7 countries, which could push risk premiums higher in the short term.
