Asia wrap: Erasing the ghosts of last week's selloff

Stephen Innes SPI Asset Management

Asian markets staged a dramatic comeback, erasing the ghosts of last week's selloff and riding high on a resurgence in Japanese equities. After a well-timed holiday, Japan's stocks jumped back into the fray, cheered on by a sagging yen, which was a windfall for its export giants. This dramatic rebound came after a jittery period that saw the VIX—the Wall Street fear barometer—spike to a heart-racing 65, well above its usual chill at around 19.5.

The scene was less rosy in Hong Kong and mainland China, where stocks wobbled under the weight of lingering bearish sentiment. Trading volumes in China dwindled to their sparsest in over four years.

Stateside, the S&P 500 played it cool, barely budging as it awaits the imminent US inflation data on Tuesday and Wednesday. Treasuries clung to gains from Monday, embodying cautious optimism.

Optimistically, the markets seem to be looking past any potential mini spikes in the CPI—unless, of course, the print throws a curveball far, high, and outside expectations. This scenario would challenge assumptions about the Fed's ability to pivot towards more aggressive rate cuts to ensure a soft landing.

The risk lurking in the financial landscape is that markets are overly positioned for the Fed to aggressively front-load rate cuts.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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