Asian equities may exhibit mixed trading, given the intense scrutiny of the Israel-Palestine conflict. Moreover, the much-anticipated US Consumer Price Index figures are set for release later today. Market stances remain relatively neutral in anticipation of the data. Recent remarks from FOMC members have leaned dovish, suggesting that the Fed might maintain current short-term rates. This comes amid noticeable financial market tightening, underscored by the upward trend of US bond yields, potentially diminishing the need for significant Fed adjustments in monetary policy. These factors might stabilize market volatility surrounding the data release, but the USD‘s position will be crucial, considering its sensitivity to rate changes and its safe-haven status.
Mounting geopolitical tensions in the Middle East are under the spotlight. A possible escalation in Israel-Palestine, especially if it draws in nations like Lebanon or Iran or if Israel undertakes a major ground operation in Gaza, could trigger significant movement in US Treasuries, reflecting a surge in demand for safe-haven assets. Similarly, the JPY and CHF are viewed as risk indicators. Recent missile interactions between Lebanon and Israel have spurred demand for safer assets. Notably, US President Joe Biden has pledged military support for Israel, cautioning Iran with his statement, “Be careful.”
Looking ahead, the spotlight is on the US inflation figures. Analysts predict the core CPI for September (excluding food and energy) to reflect a 0.3% rise month-on-month, consistent with the previous month’s figures. Despite any unexpected inflationary spikes, it seems unlikely for the FOMC to announce a rate hike in their upcoming November session. This could drive the flow to a dovish tilt before and after the data. As a heads-up for market participants, the US Q4 earnings season kicks off this Friday. Banks like JP Morgan, Wells Fargo and Blackrock are on deck to release their numbers. While rising operational costs and shrinking margins have led to varied earnings and guidance expectations, the general sentiment remains upbeat. This optimism is rooted in the robustness of the US economy, which is expected to bolster major banks and firms even in a high-rate financial landscape.
