Potential stagnation looms for Asian equities following Wall Street’s tumultuous fluctuations, fuelled by an adverse atmosphere encircling the tech sectors. This stems from reports hinting at the likelihood of the U.S. imposing export restrictions on A.I. chips to China. This development might continue to escalate, influencing not only the tech and chip industries in China, but also in the U.S. Speculations have arisen, suggesting that U.S. officials are considering tightening the export of A.I. chips to China, based on their computational prowess. Modifications to the rules are expected by the end of July, although a source has expressed caution, indicating that such actions often encounter unforeseen delays due to their U.S.-China implications. As the contest for dominance in the A.I. and chip technology intensifies between China and the U.S., investors will undoubtedly maintain a vigilant eye on these unfolding events.
Looking forward, the driving force behind the upcoming price action lies within the FX adjustments marking the end of the month/quarter, shortly before the release of crucial European CPI data. This could instigate a hawkish shift within the bond and FX space, should the data exceed expectations. Traders may begin to reassess the rising interest rate cycle more optimistically if inflation remains persistent. As the trading session progresses, the spotlight will shift to Fed Chair Powell’s anticipated speech, just ahead of the pivotal U.S. GDP and PCE data release set for tomorrow, the final trading day of the month. Consequently, there could be a surge in technical and hedging trading activity.
