Asian equity markets are poised for a bullish session, buoyed by a global rally in stocks and bonds, particularly in the U.S. Wall Street markets have seen a robust surge, significantly impacting global sentiments. This is largely attributed to a notable decline in the US Dollar, triggered by weaker-than-expected U.S. Consumer Price Index (CPI) data. This softer CPI data has led to a reassessment of the Federal Reserve’s interest rate trajectory, with a marked dovish shift in expectations. U.S. Treasury yields, especially in the shorter and middle parts of the curve, have seen their most significant drop since the banking crisis in March.
In a remarkable turn, US money markets have completely reversed their expectations of a 15% rate hike for the December Federal Reserve meeting, following the CPI data. The market now anticipates a significant easing in monetary policy, expecting a 100-basis points reduction through 2024, a steep increase from the 75 basis points previously forecasted.
Risk-on flows and unwinding of hedges will dominate the price action today, but attention is now shifting to China, where upcoming releases of industrial production and retail sales data are keenly awaited. These data points are expected to follow current trends, with a slight deceleration in industrial output as suggested by the official manufacturing PMI. Additionally, China is making a significant move to support its property market. The government plans to inject at least 1 trillion yuan into urban village renovations and affordable housing, providing low-cost financing in phases.
In the U.S., political developments are also in focus. The House of Representatives, led by Majority Whip Tom Emmer (R-MN), is gearing up to vote on a short-term funding bill. This vote is crucial to avert a government shutdown scheduled for November 17 and is indicative of the ongoing fiscal negotiations in the U.S. political arena.
