Asian equity markets may experience cautious trading, influenced by the mixed performance of global stocks. On Wall Street, initial market weaknesses showed signs of easing by the afternoon in New York, despite a lack of significant new catalysts or data. Investors are preparing for a week filled with important data, notably the US Non-Farm Payrolls (NFP) report on Friday. As the year-end approaches, it’s important to monitor USD price movements due to its global impact and observe the bond market, where U.S. Treasuries saw a notable bear flattening. This reversed many of the gains from the previous Friday and placed pressure on high-beta and risk-sensitive assets, contributing to the recent market correction.
This week’s focus on US job market data is crucial, particularly as market participants may adjust their expectations of the Federal Reserve’s policy stance for 2024. Current market pricing suggests around 125 basis points of rate cuts in 2024. However, there could be a shift towards a more hawkish stance, impacting global risk assets. Additionally, China’s November Caixin Services and Composite Purchasing Managers’ Index (PMI) are on today’s agenda, offering insights into the Chinese service sector and broader economic health. With the Federal Reserve entering its blackout period, traders will likely pay close attention to forthcoming economic reports, including the US JOLTS and ISM Services data. These reports could prompt market participants to hedge or adjust their exposure based on the data, as the market remains open to both dovish and hawkish interpretations.