Asian equity markets may lean towards the downside, reflecting a broader sentiment of caution seen in global equity markets. The lack of a specific trigger for yesterday’s downturn doesn’t overshadow the potential impact of end-of-month trading dynamics and portfolio adjustments, which could be influencing short-term market movements. Notably, the technology sector, particularly companies involved in microchips and IT, may face challenges. This is highlighted by the significant declines in U.S. chip stocks, such as NVIDIA and Applied Materials, amid regulatory concerns regarding their operations in China.
Investors are now turning their attention to the upcoming release of the U.S. January Personal Consumption Expenditures (PCE) report. This report is anticipated to shed light on inflationary pressures and could signal upcoming shifts in monetary policy. The consensus forecast for the report suggests a month-over-month increase of 0.4%, closely aligned with the average of detailed analyst predictions at 0.39%. The core PCE, which excludes volatile items, is expected to show an even more pronounced increase, with some projections reaching 0.55%. Should these figures exceed expectations, it could strengthen the U.S. dollar and exert downward pressure on bond markets, potentially affecting global stock markets, particularly in the U.S. Given the current fragile state of U.S. equities, trading near record highs, a more significant correction could be on the horizon, especially in anticipation of critical data releases next week, such as U.S. employment figures. It is also worth noting that month-end trade will deeply affect price action in this session.
