Asian Stock Market: Grinds lower despite sluggish yields, off in Japan amid hawkish Fed

Share markets in the Asia-Pacific region portray the typical moves after the hawkish Fed decision during early Thursday. The risk-aversion could also be linked to China’s covid woes and geopolitical fears emanating from North Korea. However, holiday in Japan and a light calendar elsewhere restricts the market moves of late.

While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan reverses from a two-week high to print half a percent intraday loss heading into Thursday’s European session. It should be noted that equities in China remain in the red as covid fears escalate.

A lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

Elsewhere, North Korea fired an unidentified ballistic missile toward the East Sea that has since been reported to have flown over Japan, per Reuters. Following the same, Japan warns residents to take shelter in the threat of the North Korean missile. Recently, the US warns Pyongyang over such an effort and raised market fears in Asia.

It should be noted that the mixed Aussie trade numbers and downbeat China Caixin Services PMI exert downside pressure on the ASX 200. Further, markets in Hong Kong lead the bears as HKMA copies the Fed’s 0.75% rate hike.

India’s BSE Sensex appears snapping the downtrend, even with mild gains, as the S&P Global India services Purchasing Managers' Index edged up to 55.1 in October from September's six-month low of 54.3, versus 54.6 expected, per Reuters. The news states that activity in India's dominant services industry gathered pace in October despite high inflationary pressures, underpinned by robust domestic demand, leading to the second fastest hiring pace in over three years, a private survey showed.

On a broader front, S&P 500 Futures print mild gains whereas the US 10-year and 2-year Treasury yields seesaw around 4.10% and 4.62% by the press time.

It should be noted that the Fed’s 75 bps increase in the benchmark rate initially triggered the market’s optimism as the rate statement highlighted the odds of a slower rate hike. The update stated, “Cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  However, Powell’s speech propelled the fears as he cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Moving on, the US ISM Services PMI, forecasted to ease to 55.5 in October compared to 56.7 in previous readings, could offer immediate directions but the pre-NFP trading lull is likely to challenge the momentum traders.

Also read: S&P 500 Futures dribble near one-week low as yields fade post-Fed rally