Asian equities could trade with modest gains following a non-event session on Wall Street peers as participants are waiting for Fed Chair Powell to speak at the Jackson Hole event tomorrow. It is worth noting that although no major catalyst has been driving overall equities price action in the last two days, the energy sector could outperform today. Traders saw a particularly volatile session for the oil prices amid the overhang from OPEC production cut signs, big US crude stock draws, weak gasoline demand, Russian price cap retaliation statements, and indications the Iran nuclear deal is off. The sector will be on the radar as new information about the oil market supply and demand is returned to drive the price action’s narrative. It could also affect risk assets if any escalation to the situation unexpectedly pushes benchmarks higher than 120/bbl in the coming weeks.
On the macro front, the Yuan will be closely watched as traders saw headlines suggesting the China FX regulator informally warned several banks against shorting the currency and sparked an immediate dip in USD/CNH. Participants’ recent positioning is skewed towards buying the dip in the Yuan as property concerns in China grow, and the Fed event tomorrow is sustaining a stronger dollar globally.
