Asian Stock Market: Risk-on mood underpins indices, DXY plunges below 109.00, oil advances

• Asian indices have witnessed a stellar upside amid a soaring market mood.
• A downward shift in China’s CPI data will force the PBOC to sound dovish.
• The DXY has slipped below 109.00 amid lower consensus for US inflation.

Indices in the Asian domain are witnessing significant bullish bets as the risk-off market tone has underpinned the risk-perceived assets. Asian equities are enjoying the ball as the US dollar index (DXY) has plunged on lower expectations for the US inflation rate, which will release next week.

At the press time, Japan’s Nikkei225 added 0.50%, China A50 jumped 1.56%, Hang Sang soared 2.56%, and Nifty50 gained 0.60%.

Chinese equities have been strengthened after releasing lower-than-expected inflation data. China’s Consumer Price Index (CPI) has landed at 2.5%, lower than the expectations and the prior release of 2.8% and 2.7% respectively on an annual basis. While the monthly figure is negative by 0.1% against 0.2% of expectations and 0.5% of former release.

A decline in China’s inflation will force the People’s Bank of China (PBOC) to sound dovish and trim the Prime Lending Rate (PLR) further. And, more liquidity flush into the economy will spurt the volumes in economic activities.

Meanwhile, the DXY has surrendered the crucial support of 109.00 as investors are expecting a decline in inflationary pressures. Falling gasoline prices in the US and higher interest rates by the Federal Reserve (Fed) have trimmed the consensus for the inflation data. However, the situation doesn’t trim the odds of a third consecutive 50 basis points (bps) interest rate hike by the Fed as the road to the desired rate of 2% is far from over.

On the oil front, oil prices have ignored a large build-up of oil inventories reported by the Energy Information Administration (EIA) last week. For the last week, oil stockpiles jumped by 8.844 million barrels against a decline of 3.326 million barrels.