Asian equities could trade on the backfoot as global peers continued to be hit by the selling pressure from last week with a defensive mood ahead of key Central Banks’ decisions. It is worth noting that multiple G7 Central Bankers took a hawkish tone since the Fed’s Jackson Hole symposium, with severe headwinds from energy/power prices in some countries that are also triggering recession fears from retail and business. These issues are rising risk-premia, higher US dollar, steepening yield curves and hitting risk assets like equities. And participants are also looking for asset price deflation as major Central Banks are removing their support/liquidity by ending buying bond programmes, starting a balance sheet reduction and raising their benchmark interest rates.
For the session ahead, traders will be paying close attention to US yield differentials as it could keep pressuring the FX complex and equities due to rising funding costs concerns. It is also worth mentioning that companies are now rushing to issue debt ahead of rising yields globally. This week, an oversupply of corporate issuance is also adding to the debt selling in the US as usurping government bond demand. Further upside in yields could keep a firmer bid on the US dollar and pressure on risk assets like equities, especially long-duration sectors such as technology. Attention now turns to central bank activity with a splurge of Fed speakers a week from today, traders are waiting for the US Consumer Price Index data ahead of the September 21st Fed meeting with the policymakers in a blackout period from September 10th.
