As the fourth quarter gets underway, market sentiment has taken a drastic turn, shifting from exuberance to caution in a matter of hours. The escalation of tensions between Israel and Iran has sparked a rush to safe-haven assets, causing a sharp decline in global equities and a corresponding surge in U.S. Treasuries, gold, and the dollar.
The sell-off in riskier assets was further fueled by a downward revision in the Atlanta Fed’s GDP growth estimate for the third quarter, which plummeted by 0.6 percentage points to 2.5%. This marked the largest decline since the tracking model was introduced in July.
As markets in Asia prepare to open on Wednesday, investors will be keeping a close eye on key economic indicators from South Korea and Japan. Inflation data from Seoul is expected to show a moderation in consumer prices, with annual inflation likely to dip below the 2% target rate for the first time since March 2021.
Meanwhile, Japan’s markets are expected to stabilize following the recent political upheaval, with investors getting accustomed to the new prime minister’s stance on monetary policy. Shigeru Ishiba, once considered a hawk, has softened his tone, expressing hope that the Bank of Japan will maintain its accommodative stance to ensure Japan’s full emergence from deflation.
Other key developments that could influence Asian markets on Wednesday include South Korea’s manufacturing PMI data and Japan’s consumer confidence figures. As the global economy navigates these uncertain times, investors will be seeking clues on the direction of markets in the coming quarter.
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