Asia equities rebound with the region boosted by the recovery on Wall Street where all major US indices closed higher as markets resumed to price out prospects of a more aggressive Fed rate hike and after the west abstained from the most severe sanctions on Russia after an initial invasion in Ukraine. The positive price action was also supported by the soft sanctions announced by US President Biden. The US abstained from sanctioning the energy sector, Russia President Putin, and it did not announce a removal from the SWIFT programme. However, the latter two remain on the table for the future. Traders will be paying close attention to the geopolitical tensions as Russia is expected to begin a large-scale bombardment on Kyiv at around 03:00 local time, according to recent media reports.
On the macro front, an easing of hawkish expectations from the Fed, catching Fed Funds futures indicate a 16.5% chance of a 50bps hike in March, down from 30% on Wednesday. Some desks had suggested geopolitical risks should not stop the Fed hiking by 25bps at upcoming meetings, although the uncertainty reduces the chance of a 50bps rate hike in March. For the session ahead, traders will watch the developments of the Russian invasion with the US Core PCE Price Index and Durable Goods data on the radar. ECB’s Chief Lagarde is then scheduled to hold an online press conference about Russia’s invasion of Ukraine.
