Asian markets are poised for a positive trend, following global equities that saw an uptick after a notable dip in US Treasury yields. This shift brought about a worldwide easing in risk premiums across all assets. The cause? Recent dovish remarks from the FOMC and reaffirmation from Fed’s Raphael Bostic on his intent to pause rate hikes. Additionally, increasing demand for safe-haven assets due to geopolitical tensions in the Israel-Palestine region played a part, especially after Lebanon’s Hezbollah launched a missile strike on an Israeli tank. There are growing concerns that any involvement from Lebanon and Iran in the conflict could further amplify and intensify the situation.
Recent updates also highlight China’s considerations for a new stimulus package. The main focus appears to be on allocating a minimum of CNH 1 trillion for infrastructure projects, potentially pushing this year’s budget deficit beyond the previously set 3% threshold. While discussions progress, official announcements are likely on the horizon. In summary, the buzz around China’s potential fiscal stimulus hints at a strengthened Yuan and a bolstered cyclical sector, suggesting a pivotal shift in the global financial landscape.
Traders will now be keenly eyeing the US Producer Price Index and FOMC minutes. However, all eyes are expected to turn to the US September CPI this coming Thursday. The general sentiment leans dovish. A shortfall in the data could amplify risk assets, given the prevailing narrative of surging bond yields, possibly leading to a temporary halt in the Fed’s rate adjustments. Conversely, if the data exceeds expectations, the correlation with bond yield might weaken, but the potential negative impact on risk assets could be cushioned due to the current high-yield environment.
