Asian Stock Market: Mildly positive as DXY recovery fades Wall Street gains

• Asian equities are mildly positive as a decent recovery in DXY has faded the risk-on mood.
• Japanese indices may face the heat of downward revision in the inflation-adjusted growth forecast.
• The Fed will highly likely announce a rate hike by 75 bps next week.

Markets in the Asian domain are trading mildly positive as the recovery in the US dollar index (DXY) has faded optimism derived from Wall Street gains recorded on Thursday. Better-than-expected earnings from Tesla and gains in tech stocks lifted the market sentiment. However, a sheer upside move in the DXY in the Asian session has faded optimism.

At the press time, Japan’s Nikkei225 gained 0.40%, Nifty50 added 0.21%, ChinaA50 remains subdued, while Hang Sang eased 0.22%.

The DXY has displayed a stellar recovery as investors have shifted their focus on monetary policy announcement by the Federal Reserve (Fed), which is due next week. No doubt, the investing community has ignored expectations of 100 basis points (bps) after a downward shift in long-run inflation expectations to 2.8% vs. 3.1% June print. However, the odds of a rate hike by 75 bps are still solid as price pressures have not shown any sign of exhaustion yet.

Meanwhile, the news wires from Nikkei Asia that the Japanese government is planning to scale down its inflation-adjusted economic growth forecast for fiscal 2022 to 2% from the former forecast of 3.2% may bring a steep fall in Japanese equities.

Also, Tokyo Governor Koike Yuriko has stated that the administration will record Coovid-19 cases again today. This has accelerated fears of the resurgence of Covid-19 in the Japanese economy.