Asian markets are poised for cautious trading today, influenced by a mix of factors. Wall Street‘s recent volatility, highlighted by a surge and then a drop in US equity futures after the market opened, sets a challenging backdrop. This volatility was fuelled by a combination of month-end trades, varied economic data, and hawkish comments from Federal Reserve officials. It’s essential to monitor US economic indicators and Federal Reserve speakers closely in the upcoming session, as they could significantly impact short-term market movements. Particularly, the bond market, with its substantial dovish bets along the entire yield curve, could see abrupt adjustments in positions if the Fed leans towards a more hawkish stance. This scenario was exemplified yesterday when 2024 Fed voter Barkin kept the door open for further rate hikes and dismissed early talks of rate cuts as premature.
Attention is also focused on oil prices, currently rising amid speculation ahead of the OPEC+ meeting. Reports suggest the possibility of an agreement to maintain current production restrictions, and any developments from this meeting could significantly affect energy sector prices. Additionally, traders are keenly awaiting China’s upcoming manufacturing and non-manufacturing PMI data, seeking indications of either an economic rebound or a slowdown. A disappointing outcome might pressure Chinese stocks on month-end rebalancing. Meanwhile, anticipation builds for the US PCE report, with the market heavily betting on a dovish outcome. A contrary result could lead to a re-evaluation of dovish positions, potentially lowering equity prices, raising bond yields, and strengthening the USD. The week will culminate with Federal Reserve Chair Powell’s speech on Friday, expected to offer crucial insights into the Fed’s policy approach ahead of their December meeting.
