Asian Stock Market: Diverges from solid S&P500, DXY tumbles as recession fears escalate

Markets in the Asian domain have not followed the upbeat performance from the S&P500 on Friday. The US markets remained bullish on Thursday on optimism over corporate earnings in the US. However, a follow-up move has not been observed in the Asian indices as investors have turned cautious ahead of US Personal Consumption Expenditure (PCE) inflation data.

At the press time, Japan’s Nikkei225 eased 0.30%, China A50 plunged by 1.50%, Hang Seng dived 2.16% while Nifty50 jumped almost 1%.

Chinese equities are underperforming as investors have shifted their focus toward Caixin Manufacturing PMI data, which is due on Monday. The economic data is expected to remain subdued as manufacturing activities were restricted in China on the resurgence of Covid-19. Also, the arrival of monsoons in various provinces of China has postponed construction, infrastructure, and other economic activities.

Meanwhile, the extreme sell-off in the US dollar index (DXY) has failed to support Asian equities. It is worth noting that the reason behind the downside play in the DXY is the acceleration of recession signals in the US. The economy has reported a contraction consecutively as the Gross Domestic Product (GDP) has landed at -0.9%, significantly lower than the estimates of 0.5%.

Also, the Japanese Ministry of Finance announced a budget reserve of 257 billion Japanese yen to combat rising oil and food product prices. This may support the wage prices to keep the inflation rate above 2% in the Japanese economy.