Asian Stock Market: Tracks Wall Street losses amid Fed, inflation concerns

Market sentiment remains sour during early Friday in Asia as anxiety ahead of the next week’s Federal Open Market Committee (FOMC) joins inflation fears.

That said, MSCI’s index of Asia-Pacific shares outside Japan drops 1.17% while Japan’s Nikkei 225 drops 0.85% by the press time.

Japan’s National Consumer Price Index (CPI) stayed sturdy around a two-year high and renewed inflation woes, which in turn gained support from the Bank of Japan (BOJ) Monetary Policy Meeting Minutes that signaled policymakers flagging the risk of further price pressure.

Elsewhere, Reuters relies on sources to signal another rate cut from the People’s Bank of China (PBOC) while saying, “China central bank to lower interest rates on Standing Lending Facility (SLF) for all tenors by 10 basis points on January 21.” It’s worth noting that Chinese stocks should have cheered the news but rather tracked US stock futures and Treasury yields to drop around 1.0%. The risk-off mood also drowned Hong Kong’s Hang Seng, down 0.70% intraday at the latest, even as Evergrande showed readiness to battle the financial crisis.

Earlier in Asia, the South China Morning Post (SCMP) said, “Chinese top diplomat Yang Jiechi and US national security adviser Jake Sullivan are preparing for a crunch meeting on core national security concerns.”

The downbeat sentiment at the largest customer China and fears of Omicron also weighed down shares in Australia, New Zealand and Indonesia whereas South Korea and India followed the suit.

On a broader front, the US 10-year Treasury yields print three-day downtrend from a two-year high, flashed early in the week, down six basis points to 1.77% at the latest. Also signaling the risk aversion is the 0.45% intraday loss of the S&P 500 Futures.

It should be noted that comments from US Treasury Secretary Janet Yellen triggered a risk-aversion wave during the day’s start. “Inflation rose by more than most economists, including me, expected and of course, it's our responsibility with the Fed to address that. And we will,” US Treasury Secretary Yellen said in a CNBC interview.

Looking forward, a lack of major data/events can restrict short-term market moves but the bearish bias remains intact amid downbeat Treasury yields and pre-Fed fears.

Read: Fed Preview: Three ways Powell could out-dove markets, dealing a blow to the dollar