Asia equities are trading negatively with global peers’ headwinds after the lack of improvement in Russia-Ukraine talks and a hawkish ECB meeting. However, some hawkish pricing is being pushed back in the US, as the core CPI inflation showed yesterday that it no longer appears to be getting worse. Some desks note that there was much improvement in February reading and expect the core reading to peak next month. The market is positioned for the FOMC to kick off a series of hikes next week with 25bps. Any hawkish surprise by the Fed can cause some hedging and unwinding positioning. Markets are already trading the potential scenarios, so next days’ flows and price action will be crucial to understand how the whole risk assets in DM and EM will respond.
On the commodity front, traders will be eying the energy and metal sector as volatility and lack of liquidity amid flash price surges and declines cause some margin calls. Crude oil prices continue to decline after Wednesday’s heavy unwinding of overbought conditions, with ICE raising the margin on Brent crude oil futures by 32%, potentially bearish for oil over the short term. Also, weighing on the price action, White House Press Secretary Psaki signalled it isn’t inclined to tap the Defense Production Act to spur energy production. Metals can continue to get bids on the session, particularly aluminium, after the UK sanctioned the owner of the second-largest producer, Rusal. While LME announced the nickel market would not be opening on Friday, the exchange said it is struggling to find suitors to net off shorts. Undoubtedly, the Chinese tycoon facing billions in losses, Xiang Guangda, reportedly wants to keep shorting nickel, according to recent reports. On the Russia and Ukraine front, traders watch the next high-level meeting between Putin and Finnish President Sauli Niinistö later in the session.
