Asia wrap: Bulls catching their breath

Asia is commencing the final full trading week of 2023 on Monday. The surge in risk appetite, fueled by the U.S. Federal Reserve’s recent stance, has paused as S&P bulls are likely catching their breath at the open. Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week.

Asia’s two major central banks appear to be moving in different directions, contributing to market uncertainty. The Bank of Japan (BOJ) is contemplating raising rates, while the People’s Bank of China (PBOC) seems inclined towards easing policy to combat deflation and support sluggish growth. The lack of clarity on both policy fronts is causing some discord in Asian markets today.