Asian Stock Market: Gains seem restrictive despite Fed’s smaller rate hike and subdued oil price

Markets in the Asian domain are moderately positive on Thursday as the Federal Reserve (Fed) announced a smaller interest rate hike to keep its monetary tools sharpened in its fight against inflation. Fed chair Jerome Powell announced a 25 basis point (bps) interest rate hike and pushed interest rates to 4.50-4.75% but kept doors open for further expansion in borrowing costs.

At the press time, Japan’s Nikkei225 added 0.17%, SZSE Component gained 0.36%, KOSPI climbed 0.80%, Hang Seng jumped 0.47%, and Nifty50 dropped 0.36%.

Fed Powell has confirmed that the disinflationary process has started in the United States but is still not satisfied that the monetary policy is sufficiently restrictive to achieve price stability by decelerating the Consumer Price Index (CPI) to the 2% target. Meanwhile, a decline in Automatic Data Processing (ADP) Employment data to 106K and a surge in job openings data have conveyed that the United States economy is failing to provide a sufficient supply of labor to meet the demand offered by the corporate sector. For more clarity, the US Nonfarm Payrolls (NFP) will be on investors’ radar.

Thursday’s session is going to be super-duper volatile ahead of the interest rate decision by the European Central Bank (ECB) and the Bank of England (BoE). The street is expecting a hawkish stance on policy rates by the central banks as the inflation rate in both economies is still roaring higher.

Meanwhile, Chinese stocks are likely to dance to the tunes of the Caixin Services PMI data, which will release on Friday. After the release of the unimpressive Manufacturing PMI, investors are shifting their focus toward Services PMI data. The economic data is seen at 47.3 lower than the prior release of 48.0.

On the oil front, oil price witnessed a massive sell-off on Wednesday led by further policy contraction by the Fed, weaker US ISM Manufacturing PMI, and a build-up of oil inventories reported by the US Energy Information Administration (EIA) for the week ending January 27. The oil price has attempted a recovery move, however, the downside bias is still solid.