But inflation and policy concerns are driving sentiment more than geopolitical fears. The increases in traditional ‘safe haven’ assets like gold, bonds, the yen, Swiss franc and U.S. dollar on Monday were small, in some cases negligible.
The Bank for International Settlements on Sunday called for more rate hikes, warning the world economy is at a crucial juncture in the fight against inflation. The International Monetary Fund’s Gita Gopinath said on Monday investors may be overly optimistic on the speed and cost of taming inflation.
With no major Asian economic indicators, policy decisions or policymaker speeches scheduled for Tuesday, investors will probably pick up from where U.S. markets left off on Monday.
The U.S. 2-year/10-year yield curve inverted further on Monday, to 104 basis points, which is only 6 bps away from the historic inversion of 110 bps in the immediate aftermath of the U.S. regional banking shock in March.
An inverted curve has preceded every U.S. recession in the past half century. Is this time different? So far, it would appear so, although a Fed paper on Friday concluded that restrictive policy “may contribute to a marked slowdown in investment and employment in the near term.”
In the corporate world, meanwhile, Japan is stepping up efforts to bolster its chip industry, with a government-backed fund on Monday agreeing to buy semiconductor materials maker JSR Corp <4185.T> for about $6.4 billion.
