Asia open: China in focus

The markets were on edge following a weekend filled with alarming news from the Middle East. Israel was on the brink of escalating what appears to be a state-on-state conflict with Iran, which continues to temper sentiment.

However, on Monday, equities faced more than just the spectre of potential global conflict. Adding to the unease was another strong indication of the US economy's resilience. A crucial measure of retail sales surged, quadrupling estimates and hinting at further upside for the forthcoming advance read on Q1 GDP later this month. This development further diminishes the case for rate cuts in 2024.

Long-term yields saw a sharp rise, reversing the flight-to-safety rally prompted by Friday's geopolitical tensions.

At the short end of the yield curve, the two-year yield is once again edging towards 5%, although the sell-off in this segment was relatively restrained at the beginning of the week. Monday witnessed a significant bear steepening of the yield curve.

The ongoing sell-off in Treasuries is intensifying, fueled by yet another indication that the economy is not landing softly, highlighted by the strong retail sales prints. This poses a risk of further repricing of the Fed's policy path and the withdrawal of more anticipated rate cuts, suggesting a shallower cycle and increasing the probability of no rate cuts in the foreseeable future.

Investors are even growing increasingly anxious amid the possibility that we may not have reached the peak of interest rates in the US yet.

The upcoming macroeconomic highlight of the week is expected from Beijing, where China's economic data will be unveiled, revealing the extent of their pursuit of 5% real growth. Alongside GDP figures, China will release activity data for March, encompassing retail sales, industrial output, and cumulative fixed investment.

Recent updates from Beijing indicate that the world's second-largest economy grapples with subdued domestic demand and the looming spectre of deflation.