ASX200 trades flat; AUD/USD bounces on Dollar pullback

It’s been a positive, albeit uninspiring day’s trade for markets in Asia today. Stock indices overall have crept higher, shaking off the renewed worries about the global economic outlook, while broader risk-sensitive assets have followed suit.

The event risk was limited today, and a part of the listless price action in Asian stocks could be attributed to that. The overall discourse in the market has, on one side, focused on the upside risks to the global economic outlook and the prospect of inflationary pressures; while has, on the other, been dominated by the possibility the markets have mispriced the pace and path of the global recovery.

There was scant reason for one side or the other to have had validated their general bias, and that seems to have led to the neutral sentiment overall in the market today.

Japanese equities rallying in excess of 1 per cent

Japanese equities have managed to star today, rallying in excess of 1 per cent, in what seems like something of a technical bounce as the Nikkei experiences sustained selling pressure. Chinese stocks, at least at the time of writing, are also moderately in the green, even despite some pressure on the country’s tech stocks after news broke that the US is still threatening to delist some big Chinese tech companies from US exchanges.

As for the AUX200, it has done little more than meander along, and is trading flat at time of writing. In price action that’s become characteristic of its general trend, the index has moved practically sidewise all day, as strength in health care, utilities and consumer discretionary stocks was offset by marginal falls in the heavy-hitting financial and materials sectors.

The local stock market might have also found itself dragged down by another 5 point pop in Australian government bond yields – though the intra-market dynamics don’t point to a market rotating around a move in yields.

In the currency space, there’s been a slight retracement in commodity currencies, and small fading of safe havens. The Australian Dollar has popped its head above the 0.7600 handle once again, largely as the US Dollar Index’s safe haven bid eases, somewhat.

The focus in FX markets though remains on the burgeoning rebound in the US Dollar, as the index looks on the cusp of a potential bullish reversal, as it holds above its 200-day moving average.

Crude price dips

Oil price volatility also remains in the spotlight, with the maligned and lampooned Ever Given still blocking the Suez Canal and raising concerns about global supply chains. There’s little word on when the tanker will be dislodged, but the crude price managed to dip by 1 per cent today after last night’s rebound.

Talk remains too of inflation from the temporary supply shock, though that’s not manifesting meaningfully in fixed income markets.

Looking at the night ahead now, and European indices are looking at a generally lower open, while US indices appear poised for a pop. The new flow will probably focus on central banks this evening, with the Swiss National Bank meeting, and another slew of central bankers scheduled to speak.

The markets are also awaiting a 7-year Treasury auction, which is being used by the market as something of a barometer for demand for government bonds as fears prevail about rising bond yields.

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