Asian markets may face challenges as traders navigate the quarterly Quadruple Witching expiry. Notably, a surge in US Treasury yields, triggered by a higher-than-anticipated US Producer Price Index (PPI) for February, has heightened concerns about reflation, further fuelled by earlier reports of the Consumer Price Index (CPI). This development may put Asian equities, bonds, and FX markets under strain, especially with the upcoming Federal Open Market Committee (FOMC) meeting drawing attention. Market expectations have adjusted, now anticipating a Federal Reserve rate cut in 2024 to 75 basis points, a slight shift from the previous 80 basis points.
Looking ahead, Japanese markets are in the spotlight. The focus is sharply on the impending Rengo wage announcements in Japan, expected later today at around 2 pm Tokyo time. These announcements are crucial for the Bank of Japan’s (BoJ) forthcoming decisions, particularly as the bank contemplates ending its negative interest rate policy based on wage data insights. The Japanese Yen has experienced fluctuations, weakening due to rising US yields but gaining temporary strength amid speculations of a potential BoJ interest rate increase, contingent on the Rengo wage report. In the US, the Quadruple Witching Day will command significant attention, characterized by high trading volumes and potential market volatility as participants navigate expiring futures, options, and swaps contracts in search of liquidity and favourable pricing before the US market opens.
