Asia open: Set to inch higher

Asian shares are set to inch higher Thursday, buoyed by U.S. inflation data that just handed the Fed a green light for another rate cut next month. Yet, gains might stay in check as traders use this rally to lock in profits or for others to reduce risk, all while eyeing Trump’s policy moves. With tariffs rumoured to be the next headline-grabber in his playbook, markets are on edge for what Chapter One could mean.

The latest U.S. CPI print showed a tame 0.2% month-over-month increase for October, in line with expectations and marking six consecutive months of controlled consumer inflation. This steady pace clears the way for a likely December rate cut, a “holiday treat” for investors. But, keep an eye on sticky shelter inflation—the persistent pressure could signal limits on further disinflationary momentum,

The bond market isn’t sitting still, with yields set to stay on the upswing as Wall Street grapples with a rising budget deficit, fiscal stimulus and trade tariffs from the incoming Trump administration and its impact on inflation expectations, which are creeping into a slightly uncomfortable 2.6% year-over-year level. This swirl of factors is fueling the dollar’s rally.

And then, there’s the “Yuan watch.” Traders are closely monitoring the People’s Bank of China’s daily USD/CNY fix, searching for any sign of resolve—or weakness. Yesterday’s fix came in surprisingly low, and now the market is testing the PBoC’s nerve. The fear? A quick spike in USD/CNY could unleash capital outflows, sending waves through global markets. A slight misstep could set off a cascade as we teeter on a line in the sand.