Mixed start to Asian equities following the mostly downbeat lead from Wall Street where stocks finished off lows, but the tech Nasdaq recovered from a near-3% drop as US Treasury yields wobbled. Traders will now watch the Bond/Equity correlation closely as the Fed signs a more hawkish tone for the year ahead by bringing quantitative tightening into the monetary policy blend. If the front-end and the back end of the US Treasury yield curve keep rising, it could cause a strong repricing in high beta stocks and long duration names in the emerging market space.
On the macro front, despite the risk-off tone starting the year, some desks note that the current financial conditions are still easing and that the major companies’ margins could perform well even with higher yields. Participants’ attention now pivots inflationary data points and narrative. Fed Chair Powell is set to speak later today, the US and China Consumer Price Index Wednesday, Fed Vice-Chair nominee Brainard’s hearing on Thursday, and US Retail Sales on Friday, as well as the start of the US earnings season.
