Asia equities are trading sideways following the inconclusive price action on Wall Street as US Treasury yields ground higher led by inflation breakevens. The heavily awaited Biden-Xi phone call will dominate the session ahead. However, comments from White House officials over recent days have tempered expectations for any meaningful progress on the US-China relationship.
As inflation is currently the most important macro theme in every global economy, there’s a growing worry regarding growth expectations for the year ahead. The signals of higher and more persistent inflation due to supply chain bottlenecks are starting investors and major research departments to review its growth expectations. For instance, in China, reports note that the country’s exports in November and December may be weaker than usual. The global shipping bottleneck prompted buyers to prepare orders five months ahead of the regular timeline. It also says that GDP growth in the fourth quarter faces many uncertainties, and it may slow to between 4% and 4.5% from 4.9% in Q3/2021.
On the COVID front, traders are paying attention to the fixed income markets as bonds in Europe are higher on the new lockdown announcements in Austria and Netherlands while German cases continue to surge. South Korean serious cases of COVID-19 are reported to have reached a new high, according to local reports. On the macro front, focus this week turns to US retail sales Tuesday and earnings from retailers, including US Dow Jones components Walmart and Home-Depot.
