Asia equity markets are trading in the red following the weak performance on Wall Street, where trading sentiment was fragile, and the major indices failed to maintain early pullback despite US Treasury yields easing from pandemic highs. Worth noting that the bond/equity sensitivity could stay in play as US real yields (which stock valuations are sensitive to) have not fallen as considerably. The tech sector in Asia could trade choppy as investors are currently reviewing its growth exposure.
On the COVID front, traders will be digesting the potential impacts on Japan’s economy as PM Fumio Kishida confirmed a quasi-state of emergency for Tokyo, whilst the city is to increase COVID alert to the highest level. On the macro front, the Australian dollar is outperforming in the G10 FX space as December data revealed that the jobless rate plunged to a 13-year low on the back of a little firmer than expected growth in employment. For the session ahead, traders will watch the bond/growth equity correlation to guide trading flows and pricing. The narrative remains the same, and risk is still drilling for next week’s FOMC decision, with increasingly hawkish anticipations.
