Asian Stock Market: Bears cheer Fed Chair Powell’s rate signals, strong yields

• Asia-Pacific equities ex-Japan witness losses amid fears of higher rates.
• Fed Chair Powell renews 50 bps rate hike concerns, widens yield curve inversion the most since 1981.
• Hopes from BoJ Governor’s last dovish shot, record high currency account deficit in Japan allowed Nikkei to remain firmer.
• US removes testing restrictions on travelers from China.

Share prices in the Asia-Pacific zone remain downbeat during early Wednesday amid fears of higher interest rates, as well as recession. Adding strength to the risk-off mood could be statements from Fed Chair Jerome Powell, as well as the US-China tension. However, a light calendar and reassessment of the Fed bets join cautious optimism in Japan to restrict the bearish moves of the market.

That said, MSCI’s index of Asia-Pacific shares outside Japan drops 1.75% intraday but Japan’s Nikkei 225 gained half a percent by the press time of early Wednesday morning in Europe.

While tracing the Japanese clues, a record-high Current Account Deficit in Japan joins the chatters surrounding Bank of Japan (BoJ) Governor Haruhiko Kuroda’s one last shot to defend the central bank’s easy money policy to gain major attention.

Elsewhere, Australia’s ASX 200 fails to benefit from dovish comments of Reserve Bank of Australia (RBA) Governor Philip Lowe whereas New Zealand’s NZX 50 traces its Aussie counterpart by marking the 0.75% intraday loss amid the broadly sour sentiment.

It should be noted that shares in China drop the most among the Asian markets even as the US announced the removal of the testing restrictions for China-linked travelers. The reason could be linked to fears of losing dovish bias at the People’s Bank of China (PBOC), as well as geopolitical tension between the US and China, recently over Taiwan.

On a broader front, the S&P 500 Futures remain indecisive around the 3,988 level after falling the most in two weeks the previous day. On the other hand, the difference between the 10-year and two-year US bond coupons marked the deepest yield curve inversion in more than 40 years the previous day, keeping it intact by the press time. It should be observed that the US 10-year Treasury bond yields rose 0.15% while closing around 3.97% on Tuesday but the two-year counterpart gained 2.60% on a day when poking the highest levels since 2007, to 5.02% at the latest.

Moving forward, Friday’s BoJ monetary policy meeting appears the biggest Asian event of the week. Ahead of that, the US ADP Employment Change for February and the speeches from ECB President Christine Lagarde and the second round of Fed Chair Jerome Powell’s Testimony will decorate the calendar.

Also read: S&P 500 Futures struggle as yield curve inversion turns deepest since 1981 on hawkish Fed bets