Asian stocks may face headwinds after a sell-off on Wall Street, predominantly impacted by the tech sector. Google‘s unexpected 10% dip, due to its underperforming cloud segment, significantly pressured the market. This downturn may influence cloud-focused stocks in Asia, given the prevailing pessimistic sentiment. Additionally, geopolitical developments have influenced market dynamics. Israeli Prime Minister Benjamin Netanyahu’s hints of a possible ground invasion in Gaza, coupled with news of U.S. missile deployments in the region, have increased the appeal for safe-haven assets. Consequently, gold and oil, being sensitive assets, are in the spotlight.
Amid rising Middle East tensions, the U.S. dollar surged to a peak of 106.530. The yield dynamics are also weighting on all G10 and EMFX space, and it is worth noting that If the US Treasury yields continue their bear-steepening trend, other risk assets such as equities and EM debt markets might be adversely affected in upcoming sessions, spotlighting the vulnerability of equities. Market participants are now eagerly anticipating the U.S. Q3 GDP announcement. Surpassing expectations might induce a hawkish stance among investors, with attention possibly shifting to the US curve for 2024 due to potential curve repricing based on a ‘higher for longer’ sentiment. Additionally, the USD/JPY currency pair, having breached its previous high of 150.16 to touch 150.30, remains under scrutiny. Market watchers are keen to discern any hawkish speculation or indications of intervention by the Bank of Japan around this level.
