Asian Stock Market: Recovery extends as investors cheer odds of smaller Fed rate hike, oil near $70.00

Markets in the Asian domain have stretched their recovery on hopes that the Federal Reserve (Fed) would go for a smaller rate hike. S&P500 futures recorded back-to-back bullish sessions as investors look cheerful with a ‘slow and steady’ approach towards the terminal rate.

The headline that also supported an extension of recovery in global indices is the promise from United States Treasury Secretary Janet Yellen to provide liquidity assistance to commercial banks. She further added, "A dynamic and diverse banking system - with large, mid-sized and small banks - is critical to the US economy."

At the press time, Japan’s Nikkei soared 2.07%, ChinaA50 gained 0.45%, Hang Seng accelerated 2.15%, and Nifty50 added 0.33%.

The US Dollar Index (DXY) is continuously hovering around 103.20 as investors have been sidelined. No doubt, the majority of odds are favoring a 25 basis point (bps) by the Fed, however, chances of a steady monetary policy cannot be avoided.

There is no denying the fact that Fed chair Jerome Powell would be more familiar with the situation of the banking crisis and forward consequences. Also, Standard and Poor downgraded the creditworthiness of the First Republic Bank into deeper junk, despite a huge liquidity influx into the mid-side US bank, citing that the promised helicopter money is unable to get the commercial bank out of trouble. So an alternative of a steady monetary policy to restore the confidence of the market participants cannot be ruled out.

Meanwhile, Japanese equities have sky-rocketed Japanese Chief Cabinet Secretary Hirokazu Matsuno has promised to allocate more than 2 trillion yen from reserves to safeguard households from rising prices, as reported by Reuters. The relief package would strengthen the overall demand in the economy and would contribute to keep the inflation rate near desired levels. The collaborative effort from the Japanese administration and the Bank of Japan (BoJ) could be the key to maintaining inflation for the Japanese Yen as competitive.

On the oil front, the oil price is struggling to capture the critical resistance of $70.00, upside looks likely as more sanctions on the Russian oil supply are likely to remain absent. Going forward, investors will keenly focus on the weekly inventory data to be reported by the US Energy Information Administration (EIA). As per the consensus, the oil stockpiles would decline by 1.448 million barrels for the week ending March 17.