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APAC week ahead: Risk-off mounts, FOMC meeting minutes, RBA rates decision in focus


Asia markets are expected to be under pressure this week as risk-off sentiment mounts amid officially inverted bond yields. The US stock markets finished higher in March but lodged the first quarterly losses in two years. Investment funds are likely to start rotating out of risky assets or “sell the rally” to secure profits before finding further certainty from the upcoming earnings season in two weeks. 

10-year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity

Source: Federal Reserve Bank of St. Louis, Fred; Shaded areas indicate US recessions

Key points

  • The US stocks rally may take a breather, with the inverted major bonds yields repeatedly flashing a recession signal.
  • The oil price is under pressure on Biden's administration's plan to release the oil reserve.
  • USD faces challenges against JPY and EUR as investment funds start rotating back to the bond markets

See the latest markets moves

Key instruments to watch

US stocks

The S&P 500 finished higher last Friday, with the defensive sectors leading the gains, suggesting risk-off trades build amid mounting uncertainties. The benchmark index registered the third consecutive weekly gain, the longest winning streak since November 2021. However, the markets rally may take a breather, with the inverted major bond yields repeatedly flashing a recession signal.

Check in on the US stock markets movements


Oil prices plunged on the news that US President Joe Biden's administration plans to release 1 million barrels of oil from its reserve to counter the war-induced supply shortage, followed by a possible further oil release from the IEA countries. The joint efforts of the US and its allies could temporally balance off the supply shortfalls in 2022, but it might not be a long-term solution. Also, the US oil producers may be reluctant for an output increase to keep profit high. Where is the oil price heading? 

See current oil prices


The surging US bond yields triggered a sharp USD appreciation against the Japanese Yen. But notably, the selloff halted towards the month-end in March, the US 10-year Treasury yield fell from the crucial level of 2.55% to 2.39% last Friday, suggesting investors may start rotating the funds back to the bond markets for a discounted price. USD/JPY may slow the upside momentum as such. The signal of a weakening USD may also reflect the pair of EUR/USD, which sees a continuation of the corrective rally in place since March 7.

See the US dollar movements

Key economic data and events

US ISM service PMI, FOMC meeting minutes

Last Friday, the strong jobs data again strengthened the odds in favor of more aggressive rate hikes and sparked risk-off trades across the broader markets. The Fed Chair Jerome Powell indicated a large-scale rate hike could be on the table in the next two meetings. The FOMC meeting minutes on Thursday will give more clues on its further policy. And the Mach ISM service PMI is expected to improve further.

China Caixin Service PMI

China’s March manufacturer PMI released last week suggested a sharp slowdown in its economic activities due to the widening covid-lockdowns in the major cities. The Caixin service PMI is expected to fall into the contraction territory at 49.9 for the same reason. The Chinese economy is facing severe challenges amid the covid outbreak and geopolitical uncertainties sparked by the Russia-Ukraine war. The US-listed Chinese companies are under pressure of being delisted if Beijing does not give its full acceptance to the US inspection.

RBA policy meeting

The Reserve Bank of Australia board meets on Tuesday. Against the backdrop of the strong labor markets and consumer confidence, economists expect the RBA will become more hawkish despite the bank insisting it is not in any hurry to raise interest rates. The RBA indicated to keep the ultra-low cash rate at 0.1% until employment is strong enough to accelerate wages growth when the economy could eventually face a risk of being overheated. The Interbank futures are pricing in 3 rate hikes for 2022.

Canada employment data

The consensus is calling for 80,000 new jobs added in March, and the unemployment rate could drop to 5.4% from 5.5% in February. Expectations for the Bank of Canada to accelerate rate hikes are also strong due to the war-sparked oil price surge and an inflationary spiral.

Europe’s Week Ahead

  • THG full-year results – Wednesday
  • European Central Bank minutes – Thursday

  • Asos half-year results 

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