A look at the day ahead in Asian markets from Jamie McGeever.

The Santa rally is turning into the Grinch's revenge.

U.S. and global recession fears continue to cast a dark shadow over investor sentiment and risk assets, shutting out the glimmers of light from China relaxing its zero-COVID rules and signs that inflationary pressures and fears are easing.

The year-end equity rally lost more steam on Wednesday as the S&P 500 fell for a fifth day in a row, and the MSCI World and MSCI Asia ex-Japan indices fell for a fourth - a stretch of declines not seen for two months.

Investors' glass is definitely looking half empty. A week or two ago, news that China has announced the most sweeping changes to its resolute anti-COVID regime since the pandemic began would probably have trumped dismal trade figures.

Not now.

Import and export activity in November slumped at the fastest pace for two and a half years, resulting in the smallest surplus since April. On top of that, analysts expect exports to continue falling in the coming months.

The recessionary and disinflationary signals flashed loud and clear on Wednesday.

Brent crude oil

Brent crude oil fell to a 2022 low below $77 a barrel, shrinking its year-on-year gain to just 2%. The inflationary impulse from oil will soon turn disinflationary - little wonder that the U.S. yield curve continues to flatten and inflation breakeven rates across the curve are falling closer towards the Fed's 2% target.

The U.S. 10-year Treasury yield hit a three-month low of 3.42% and is down 90 basis points from its October peak. November saw the biggest monthly drop in yield - 37 bps - since March 2020, and already this month it is down 28 bps.

Meanwhile, the Bank of Canada delivered a 'dovish hike', countering the hawkish hikes from Australia and India. Ahead of the Fed's rate decision next week, U.S. terminal rate expectations on Wednesday backed away from 5% and around 55 basis points of easing is priced into the 2023 curve.

Three key developments that could provide more direction to markets on Thursday:

- Japan GDP (Q3, revised)

- Japan current account (October)

- Australia trade (October)