Asian equities are trading green following gains in Wall Street‘s energy and tech sector. The trading sentiment was underpinned as U.S. Treasury yields eased. The focus was on Fed Chair Powell’s hearing in the Senate, where he abstained from ramping up the hawkish rhetoric. Without a hawkish dive from the Fed, the current market conditions could act as the main driver for a risk-on trade in Asia-Pacific equities, mainly in the energy and tech sectors.
On the macro front in China, the headline of the CPI & PPI releases provided noteworthy misses in December as inflationary pressures eased back. The reading could give more room for the PBoC to engage with monetary policy easing for the months ahead. Worth noting that Chinese officials have been asking for a more pro-growth policy in recent months. A headwind for PBoC with a more flexible policy will be a hawkish Fed if it needs to accelerate its policy normalization due to inflationary pressures. Otherwise, if the PBoC accepts the risks of another easing leg, medium-term, as the Chinese economy starts to gear towards growth, it supports local risk assets such as equities that are currently trading at ‘distressed’ levels. Looking ahead on today’s calendar, traders look towards US CPI for December as the key risk event, with the U.S. 10-year Treasury auction also on the radar.
