Exit, wait and see

Before the release of US inflation data, there is a strong sense of caution in the global market.
1. The Chinese stock market fell today and failed to hold onto yesterday's gains. Our exclusive "Fear and Greed Index" has already sent a signal before the market opened.
· First, yesterday's rise prompted some people to reduce their positions;
· Second, in the case of mixed gains and losses in overnight US stocks, investors tend to exit before the release of US CPI data on Wednesday. In addition, the fourth quarter economic data from China to be released later this week, as well as Trump's inauguration next week, will also test the market.
While China may ramp up fiscal stimulus, it's how the funds are used that matters most. There has been little detail on the stimulus measure, so it's unclear which consumer categories will be covered and how much of a boost it will give to consumption, leaving investors with little confidence in a rebound.
2. After yesterday's decline, the US dollar index continued to weaken, but the high yield of the 10-year US Treasury bonds hanging over people, indicating that this round of test is not over yet.
3. At 21:30 Beijing time tonight, the US CPI data for December will be released, and the overall sensitivity to interest rates in the past month indicates an increased importance of tonight's CPI data.
Many analysts on Wall Street believe that tonight's CPI data may be unexpectedly higher than expected, which will intensify concerns in the market about the stagnation of the inflation process. As the market has prepared for the worst, as long as the data is not significantly higher than expected, it will not have catastrophic consequences.
. If this data is moderate (basically in line with market expectations), it will still be seen as bad news by the market because the PPI announced on Tuesday was higher in terms of personal consumption expenditure, which will lead to an increase in core PCE. After the release of CPI tonight, analysts will be able to roughly estimate the core PCE inflation for December, and now the pressure is on CPI.
If the data exceeds expectations, the focus will be on whether the 10-year U.S. Treasury yield will touch 5%. If this happens, even if the stock market does not plummet that day, it may also fall in the next one or two days.
If the data comes in below expectations, we will see the U.S. dollar being sold off, and U.S. Treasury yields will also see a meaningful decline.
But for tomorrow's Asian stock markets, people will not look at many details of analytical data, and will only make judgments based on the trend of the US stock market, the US dollar, and US bond yields.