Asian markets appear poised for a cautious stance following Wall Street‘s retreat from risk, spurred by traders adjusting their expectations for a lesser likelihood of a Fed rate cut, increasing long-term yields, and mounting geopolitical uncertainties. Amid this turbulence, Wall Street’s “fear barometer,” the VIX, approaches the crucial 20% mark, a significant threshold for equity markets. Concurrently, Gold surged past notable resistance levels as traders sought a safe haven. This downturn has seen a surge in extensive selling algorithms, evidenced by the TICK index displaying more than 1,000 name reductions ahead of Friday’s options expiration. Notably, such technical trades often emerge before expiration dates, even as global market risk sentiment remains elevated.
On a brighter note, China’s Q3 GDP report brought some solace. The nation reported a 4.9% annual growth rate, surpassing the anticipated 4.5% forecast by economists. This led to swift revisions, elevating GDP forecasts for the year. However, there remains apprehension regarding China’s real estate sector, especially given the looming concerns about a potential default by Country Garden Holdings. Such uncertainties could trigger defensive stances in Asia’s short-term risk asset demand, especially as observers keep a vigilant eye on potential ripple effects and anticipate additional support from China.
The Dollar‘s price action will serve as an important indicator of risk appetite; its strong demand showcases its role as a refuge in these stormy market waters. With economic volatility aside, geopolitical strains persistently sway the markets. In this context, Oil remains the asset most susceptible to these influences. This is underscored by the recent call from Iranian Foreign Minister, Hossein Amir-Abdollahian, for a comprehensive boycott against Israel, encompassing an oil embargo and diplomatic expulsions. As the global stage recalibrates, attention is now shifting towards forthcoming employment statistics from Australia and insights from Fed Chair Powell during his address at the Economic Club of New York Luncheon. Market watchers will be keenly searching for dovish hints, especially as risk assets face headwinds approaching year-end, casting doubt on any imminent rallies.
