Asian Stock Market: Trades mixed amid firmer yields, concerns over China, Japan

• Asia-Pacific shares seek clear directions as S&P 500 Futures print mild gains despite Wall Street’s losses.
• Yields remain edgy as Federal Reserve (Fed) officials tease firmer rates.
• Doubts over China’s easing of Covid controls, multi-year high Japan inflation entertain traders amid a light calendar.

Equity markets in the Asia-Pacific region remain sluggish at best during early Friday as a lack of major data/events joins mixed macros. Also likely to have challenged the Asian traders could be the contrasting performance of the S&P 500 Futures and the Wall Street benchmarks.

While portraying the mood, MSCI’s index of Asia-Pacific shares ex-Japan rises half a percent intraday but Japan’s Nikkei 225 printed mild losses at the latest.

It’s worth noting that hawkish comments from the Federal Reserve officials joined the Coronavirus woes in China to challenge the optimists. However, a lack of liquidity in the bond market and the policymakers’ rejection of economic fears keep the buyers hopeful amid expectations of more stimulus.

Even so, the yield curve portrays recession woes and exerts downside pressure on the equities. “Two-year yields crept back up to 4.46%, retracing a little of last week’s sharp inflation-driven drop of 33 basis points to a low of 4.29%. That left them 69 basis points above 10-year yields, the largest inversion since 1981,” mentioned Reuters.

Elsewhere, Japan’s headline National Consumer Price Index (CPI) grew 3.7% YoY versus 2.7% expected and 3.0% prior. More importantly, the National CPI ex-Fresh Food, mostly known as the Core CPI, rose at the highest pace since 1982. However, Bank of Japan’s (BOJ) Governor Haruhiko defends the easy-money policy and keeps bulls in Tokyo.

Furthermore, doctors in China have made a stark warning to President Xi Jinping about unlocking the economy despite recently higher Covid numbers, per the Financial Times (FT). Though, comments from People’s Bank of China (PBOC) adviser Liu Shijin, who said that China’s GDP target for 2023 should be at least 5%, seemed to have probed the bears.

On a different page, North Korea’s missile tests and Thailand’s urge to the global leaders to put aside political differences and focus on resolving pressing global economic issues in areas such as trade and inflation seemed to have weighed on the market sentiment.

On Thursday, the US reported mixed data but St. Louis Federal Reserve President James Bullard and Minneapolis Fed President Neel Kashkari questioned the market’s bets on the easy rate hike from the Fed in December, which in turn challenged sentiment.

Looking forward, a lack of major data/events could keep the traders on the edge but the bears are bracing for re-entry.