Asian markets are expected to experience some volatility, influenced by mixed global equities showing a slight positive trend. This trend is fuelled by a dovish reaction to a substantial decline in U.S. job openings, as indicated by the October Job Openings and Labour Turnover Survey (JOLTS). However, this optimism is somewhat restrained due to a stronger-than-anticipated performance in the U.S. Institute for Supply Management (ISM) Services Index. The predominant focus remains on the dovish stance of Global Central Banks as the year ends, with significant attention on next week’s policy decisions.
The Federal Reserve is under scrutiny, as short-term market movements in key risk assets this week will be influenced by various data points. Market expectations for interest rate cuts in 2024 have slightly increased, now anticipating a reduction of 128 basis points, up from 125 basis points earlier in the week.
Concurrently, Chinese cyclical stocks and the Yuan are under pressure following Moody’s downgrade of its outlook on China. On a brighter note, China’s Caixin Services Purchasing Managers’ Index (PMI) climbed to a three-month peak of 51.5, exceeding forecasts and lending a temporary uplift. Moving forward, traders await more immediate U.S. labour market data, including the November ADP employment report, weekly jobless claims, and the November Non-Farm Payroll (NFP) report. The NFP is likely to reflect a positive adjustment, attributed to the return of striking workers. Surpassing expectations in the upcoming data could challenge the anticipated pace and magnitude of rate cuts for 2024, potentially influencing profit-taking and deleveraging in risk assets, as market participants appear heavily invested in these assets.
