Asian equities could trade mixed ahead of month-end trade. It is worth noting that yields and USD price action could drive equity trade for the session as traders rebalance portfolios and market exposures. The technology sector could outperform as the US tech-heavy Nasdaq traded higher after founding support from Tesla, trading higher after the production data beat in Germany and getting tailwinds from lower US Treasury Yields and a weaker USD.
Month-end flows will drive short-term price action, so it is worth keeping an eye on the bond and USD markets as lead indicators for directional moves. It is worth noting that recent price actions have been driven by hawkish repricing, especially by the Fed, with desks now starting to call the first rate cut by the FOMC to March 2024 from December 2023. With key data on the light side this week, traders will track the Fed narrative with the new Chicago appointee (and potentially Vice Chair) Goolsbee to speak later today. On the geopolitical front, traders monitor any escalation from the Russia-Ukraine war side as US Treasury Secretary Janet Yellen warned of ‘severe consequences‘ for China if government institutions provide material support to Russia in violation of US sanctions. Any concrete action from China in support of Russia could be seen as a strong rationale for a derisk and deleverage from Asian exposure. That could trigger a strong sell-off on risky assets like equities and private and public debt markets.
