Asian Stock Market: Cautious optimism prevails ahead of US inflation, DXY, Oil print mild losses

Risk appetite remains mildly positive in the Asia-Pacific zone as traders brace for the key US inflation data during early Tuesday. That said, softer US Treasury yields and the upbeat performance of Wall Street put a floor under the equities but hawkish concerns surrounding the Bank of Japan (BoJ) join mixed Aussie data and fears emanating from China to weigh on sentiment.

While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan rises 0.33% intraday whereas Japan’s Nikkei 225 adds 0.65% to 27,600 heading into the European session.

It’s worth noting that Japan’s preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data came in mixed and favored the equity trader in Tokyo. As per the readings, the Q4 GDP reversed the previous 0.2% contraction with the same quarterly growth figures. However, the GDP Deflator rose to 1.1% versus -0.3% expected and prior during the stated period. On the contrary was the official nomination of Kazuo Ueda as the BoJ leader. Earlier in the day, Bloomberg came out with an analysis suggesting further challenges to the Bank of Japan’s (BoJ) easy money policy during the incoming Kazuo Ueda’s reign. It’s worth noting that Ueda previously defended the current monetary policy in his latest public speech.

Elsewhere, Australia’s NAB Business Confidence rose to 6.0 in January, from -1.0 prior and 1.0 expected while the NAB Business Conditions rallied to 18.0 compared to 8.0 expected and 12.0 prior. It’s worth noting that Australia’s Westpac Consumer Confidence, flashed earlier in Asia, dropped to -6.9% for February versus 5.0% prior. On the same line, the Reserve Bank of New Zealand’s (RBNZ) Inflation Expectations for the first quarter (Q1) of 2023 pushed back the policy hawks by showing 3.3% figures versus 3.62% prior.

On the other hand, fresh fears of the US-China tension over the balloon shooting also challenge the sentiment and probe the GBP/USD buyers. US Congress will take a bipartisan look at unidentified aerial objects that have made their way into U.S. and Canadian airspace, and why they were not found sooner,” said US Senate Majority Leader Chuck Schumer. It’s worth noting that a US Military General previously ruled out odds favoring the likely hand of China in the “unidentified objects” which were shot down during the weekend.

Amid these plays, stocks in Australia and New Zealand print mild gains but those from China remain depressed even as the People’s Bank of China (PBOC) is up for increasing the quota of its Medium-term Lending Facility (MLF) in February, per China Securities News.

On a broader front, hawkish Fed talks join a retreat in the US inflation expectations to confuse market players ahead of the key US data. However, softer US Treasury bond yields allow traders to remain optimistic. It should be observed that the S&P 500 Futures remain indecisive following the biggest daily jump of the month while the US 10-year Treasury bond yields drop nearly two basis points to 3.69% at the latest, after reversing from a one-month high the previous day. Further, the US Dollar Index (DXY) remains pressured while equities in the Asia-Pacific region trade mixed at the latest.

Also read: S&P 500 Futures, US Treasury bond yields remain dicey as traders await US inflation