Asia Market Open Highlights
Everyone in the same boat limits the bounce
Asian equities mostly began higher, benefiting from lessening inflationary pressures in the United States and hopes that central banks will decrease the pace of interest rate rises.
The lack of a dramatic stock market rebound is most likely due to everyone being in the same reduced inflation boat. Nonetheless, investors are growing increasingly anxious about the impact on corporate America and the extent of the economic cratering caused by the Fed's aggressive rate rise approach. While a large negative miss on CPI may have led to a bias toward considerably more euphoric markets, the inline data nevertheless has investors perplexed.
Not to mention the genuine fear in certain quarters that inflation may stage a comeback owing to the strength of the US labor market. Indeed, this scenario highlights a fundamental feature that might result in the Fed keeping rates higher for longer in 2023 than many expect.
In Japan, stocks are mixed, with the Nikkei 225 down and the wider TOPIX index little changed as the outlook for exporters dims due to the yen's rise.
Forex
With the substantial declines in bond and market volatility, the dollar is no longer required as a haven; hence, the efficiency of dollar cash as a risk-off hedge is decreasing, which might start a larger unwind of USD holdings on its own.
Stoxx 600 equity inflow trackers reveal a fresh spike as investors become more confident about growth outside of the US, resulting in a better corporate profit situation in Europe. The restoration of long-only investor flow in USD is critical to pushing the EURUSD higher.
IMM positioning should dissuade people from estimating the probable size of dollar fluctuations. It is actual money and corporate USD currency cash that matters, i.e., the proverbial dry powder on the sidelines, which is not represented in positioning surveys.