Asian Stock Market: Traces weaker S&P500 on ultra-hawkish Fed guidance, oil weakens
- Asian indices have tumbled after following the negative cues from Wall Street.
- Fed hawkish guidance has accelerated the risk-off impulse in the Asian markets.
- BOJ’s continuation of its dovish stance has supported Nikkei225 on the downside.
- Lower oil prices will delight the Asian indices by trimming their fiscal deficit.
Markets in the Asian domain have shifted into a bearish trajectory after tracing negative cues from S&P500. Asian equities have fallen dramatically after a scrutiny of the roadmap provided by the Federal Reserve (Fed) to respect its foremost priority of bringing price stability.
At the press time, Japan’s Nikkei225 and ChinaA50 tumbled 0.80%, and Hang Seng plunged almost 2%. Outside Tokyo, Australian markets are closed on account of National Mourning Day.
Bloods spilled on Wall Street on Wednesday after the Fed chair Jerome Powell sounded extremely hawkish while dictating the guidance on interest rates. A third consecutive 75 basis points (bps) rate hike announcement didn’t do any worse as it was already priced in by the market participants. However, the target for terminal rates at 4.6% brought carnage.
Fed Powell and his colleagues are ready to sacrifice growth projections, employment, and demand for housing and durable goods to drag the inflation rate to desired levels.
Meanwhile, Japanese equities have trimmed their losses after a weak open. Nikkei225 is gaining strength on a continuation of the ‘dovish’ stance on interest rates by the Bank of Japan (BOJ). The BOJ has kept its policy unchanged despite the headwinds of sheer depreciation in the Japanese yen against the remaining G-7 countries. No doubt, the dovish BOJ will keep pouring liquidity into the economy but it will keep the market cap of imported-inputs-dependent companies on the tenterhooks.
On the oil front, oil prices are expected to remain in the grip of bears as soaring interest rates by western central banks will keep the oil demand lower. The black gold has declined again towards $82.00 and will surrender the support sooner. It is worth noting that lower oil prices will benefit the Asian indices as it will delight them in reducing the fiscal deficit.