Asian Stock Market: Virus woes test bulls, US inflation in focus

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  • Asian equities track Wall Street gains but covid fears challenge bulls in Australia, Tokyo.
  • China’s CPI, PPI both eased in December, Australia Job Vacancies rallied during three months to November.
  • World Bank cuts global growth forecasts amid worsening virus conditions.
  • Fed’s Powell underpinned risk-on mood with economic optimism, balance sheet comments.

Asia shares stay mostly higher amid the market’s optimism that the Fed will take time before starting to adjust record balance sheet debt, as favored by Chairman Jerome Powell in his testimony the previous day.

Also positive for the markets were downbeat inflation data from China and firmer second-tier employment figures from Australia. It should be noted, however, that anxiety ahead of the US Consumer Price Index (CPI) for December joins coronavirus-linked updates to challenge the investors.

That said, MSCI’s index of Asia-Pacific shares ex-Japan rise 1.43% intraday but Japan’s Nikkei 225 drops by around 1.0% heading into Wednesday’s European session.

Worsening covid conditions in Australia and Japan could be linked to the losses of ASX 200 and Nikkei 225 respectively. In doing so, traders in Tokyo ignore the Bank of Japan’s (BOJ) upward revision to the economic assessment to nine regions as well as an upward revision to Japan’s 2022 GDP growth by the World Bank, up by 0.3% to 2.9%.

Elsewhere, China’s headline Consumer Price Index (CPI) eased below 1.8% forecast and 2.3% prior to 1.5% YoY while the MoM readings also dropped to -0.3% compared to +0.2% expected and +0.4% previous readouts. Additionally, the factory-gate inflation, namely the Producer Price Index (PPI) also dropped below 11.1% expected and 12.9% prior, to 10.3% YoY for December.

Furthermore, Australia’s Job Vacancies for three months to November jumped past -9.8% prior to 18.5% QoQ during early Asia.

That said, markets in China, Hong Kong, Indonesia and South Korea portray a risk-on mood amid downbeat US Treasury yields. On the same line are India’s BSE Sensex and New Zealand’s NZX 50, up 0.80% and 0.20% in that order by the press time.

On Tuesday, Wall Street cheered Fed Chair Jerome Powell’s measured Testimony that showed readiness to hike interest rates but remained cautious over balance sheet normalization. Fed’s Powell also expected that the supply crunch will ease somewhat and the economic impact of the Omicron variant will be short-lived.

Moving on, global markets are likely to remain sidelined ahead of the key US inflation figures for December, expected 7.0% YoY versus 6.8% prior, to determine near-term moves.

Read: US T-bond yields, S&P 500 Futures portray pre-Inflation anxiety