Asian equities might trade on a defensive tone as US equities sold off yesterday in risk-off trade, tracking the poor tone out of Europe as Russia said that the Nord Stream 1 turbine is yet to be installed. Also, US earnings weighed on the price action after a profit warning from Walmart and further reports of layoffs in tech, with Shopify laying off its workers as it overestimated how long the pandemic growth it saw would last. A blur economic outlook for the next quarter could also influence risk appetite in Asia as cyclical markets could struggle in a potential slow growth environment.
Participants will be eyeing today’s Chinese Industrial Profits data ahead of expectations with the next Biden-Xi call, with the White House Spokesman noting that he doubts tariffs will be a big topic for the call. Traders will be closing watching the USD as it traded firmer yesterday due to month-end rebalancing, and it could work now as a cross-market correlation driver ahead of tomorrow’s risk event, the FOMC meeting. With firm consensus for a 75bp Fed hike, markets will be focusing on the forward guidance during the press conference with Fed Chair Powell. The key question on the Committee Statement key is the FOMC’s thinking on the magnitude of the next hike.
