Asian Stock Market: Capitalizes on less-hawkish Fed policy outlook, oil explores above $69.00

Markets in the Asian domain are following the footprints of the S&P500 as the 500-US stocks basket displayed a solid recovery on Thursday. Stellar recovery in the United States equities was witnessed after investors ignored the potential risk of a global banking meltdown and cheered rising expectations of a smaller interest rate hike by the Federal Reserve (Fed).

The US Dollar Index (DXY) has corrected sharply below 104.10 as the appeal for safe-haven assets has squeezed dramatically. Sheer buying interest for global equities indicates an improvement in the risk appetite of the market participants.

At the press time, Japan’s Nikkei225 jumped 1.14%, ChinaA50 climbed 1.33%, Hang Seng soared 1.72%, and Nifty50 added 0.50%.

Chinese stocks are rising firmly ahead of the interest rate decision by the People’s Bank of China (PBoC), which will be announced on Monday. Considering the requirement of stimulus to trigger overall demand in the Chinese economy after the rollback of pandemic controls, an expansionary monetary policy is expected.

Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

Meanwhile, Japanese equities have got strengthened as ex-Bank of Japan (BoJ) Governor Haruhiko Kuroda has advocated for more rate cuts. Investors should be aware of the fact that BoJ’s current interest rate is already negative and a further rate cut delivers an expression of more stimulus required to trigger more demand. The collapse of the Silicon Valley Bank (SVB) has fueled the demand for the Japanese Yen as safe-haven. Bloomberg reported that “Hedge funds held the biggest yen-bearish positions in six months last week, a painful trade as the collapse of Silicon Valley Bank suddenly boosted demand for Japan’s currency as a haven.

On the oil front, oil price have scaled above $69.00 as an upward revision in 2023 China’s Gross Domestic Product (GDP) to 6.0% by Goldman Sachs, conveys more oil demand ahead. Earlier, the investment banking firm projected a growth rate of 5.5%.