Asian equities could trade choppy after yesterday’s decline on Wall Street, led by the long-duration names as US Treasury Yields rose ahead of today’s Fed’s Chair Powell speech. It will be the last before the blackout period next week. The US jobs report will be on Friday, which could play a key pivot point for traders’ risk exposure ahead of December’s FOMC decision with terminal rates in question.
It is also worth noting that traders are rebalancing their exposure due to month-end requirements ahead of the last month of the year. The risk assets selling yesterday offset the risk-on mood with renewed hopes around China losing COVID restrictions. Traders should keep a close eye on the USD, and US yields dynamics ahead of the key Fed’s Powell speech, where he will be giving remarks about the economic outlook, inflation, and the labour market. That could shape short-term price action as month-end activity also puts bonds and equities under pressure.
On the macro front, headlines from China regarding COVID could create some choppy trade. Although recent COVID easing is being considered, it does not prevent further economic disruption. COVID cases should continue to rise, and restrictions must be re-tightened before year-end. Participants will be waiting for the Chinese Manufacturing and non-manufacturing PMIs, but it is unlikely to cause any reaction as it will not capture recent lockdowns and trade data/sentiment.
