Asian markets are poised to react positively, even in light of challenges on Wall Street and a robust US PMI survey. However, there’s potential downside, particularly after Alphabet‘s earnings disappointment, primarily because its cloud segment didn’t meet expectations. This unit, pivotal for growth due to its emphasis on artificial intelligence, reported its quarterly sales and profit. Traders will be digesting the latest earning reports today, where the AI and Cloud names in Asia should be watched due to its sensitivity to US performance peers. Adding to the mixed theme, Microsoft earnings came stronger than expected, and that could balance the downside trade. Adding to the risk basket, the US dollar is showing strength, and volatility in the US Treasury Yield curve continues to affect short-term price action on risk assets.
In contrast, the Chinese market might benefit from positive developments in the property, commodity, and retail equity sectors. Reports indicate a forthcoming visit by China’s President Xi to the PBoC, interpreted as a renewed focus on economic matters.
The Israel-Hamas conflict is still a market theme to watch. Recent diplomatic discussions have eased tensions as Israel has refrained from military action in Gaza. This, coupled with news about ongoing hostage release negotiations, has led to a perceived de-escalation, prompting traders to reduce their defensive positions. Consequently, Oil and Gold benchmarks have weakened. However, the possibility of Iran-Hezbollah getting directly involved could escalate tensions. If Israel pursues a ground invasion, which some Israeli officials are hinting at, it could further complicate matters. The international community, especially the West, is keeping a keen eye on the situation. White House National Security Council Spokesperson, John Kirby, clarified the US’s position against an immediate ceasefire, suggesting it might benefit Hamas. He also noted that any decision regarding a ground invasion of Gaza would be made solely by the Israeli Defence Forces. Oil, Gold and USD should remain as leading indicators.
