Asia equities could trade positive after a remarkable pullback from the selling that was triggered by hotter US Consumer Price Index data. There was a strong selling on the USD and a buying on EU, US, and UK bonds after some dovish reports on the ECB and a potential fiscal U-turn in the UK. There was not a single factor to explain yesterday’s price action, some desks were also reporting short squeeze from hedge funds clients, and others suggested that the sell-off was overdone.
For the session ahead, traders will be digesting the recent squeeze eyeing Fed and ECB speakers, the UK fiscal theme, as the BoE buyback programme finishes today. On the macro front, the Chinese inflation date will be on the radar, where CPI is expected to rise further, where expectations are for ongoing upside pressures in the food segment. PPI data is forecast to moderate as China’s economy is still facing challenges, including Covid disruptions and a continued property slump. Although the data is important for forwarding projections, it is unlikely that today’s data will trigger any policy response from Chinese policymakers. The PBoC is in an easing mode amid slow growth and supporting fragile parts of the economy.
