Asian Stock Market: Plummets as yields roar, Fed Powell’s speech in focus, oil weakens

• Asian indices have plunged as 10-year benchmark yields have touched a high of 4%.
• Japanese equities are plummeting as firms are set to report a weak quarterly result season.
• Investors should brace for a hawkish tone by the Fed Powell while delivering Wednesday’s speech.

Markets in the Asian domain are displaying a vulnerable performance as US Treasury yields have advanced sharply on expectations of further acceleration in the interest rates by the Federal Reserve (Fed). As the Federal Reserve (Fed) is preparing to reach the desired terminal rate of 4.6% sooner to achieve price stability in the economy, yields are gaining traction. The 10-year benchmark US Treasury yields have kissed 4% for the first time since 2010.

At the press time, Japan’s Nikkei225 plunged 2.11%, Hang Seng nosedived 2.82% while SZSE Component tumbled 1.46%.

Japanese equities have continued their falling spree as an unscheduled bond-buying program by the Bank of Japan (BOJ) could crush the upside momentum in Japanese yen. The depreciating yen is a major concern for the Japanese government as corporate margins are dropping led by increment in imported inputs prices. The third quarterly result season in the Japanese economy is at the gateway and major firms are expected to report pain in their EBITDA margins.

Meanwhile, Chinese indices are facing pressure after the World Bank slashed growth rates for 2023 due to ongoing zero tolerance toward Covid-19 and the real estate crisis. A slump in demand for real estate has also trimmed demand for steel, base metals, cement, and other building materials in the Chinese economy.

Going forward, the speech from Fed chair Jerome Powell will be of utmost importance. As price pressures are not displaying a promising decline, investors are expected ‘hawkish’ guidance on interest rates.

On the oil front, oil prices are witnessing subdued moves ahead of the release of the inventory data by the Energy Information Administration (EIA). The agency is displaying a build-up of stockpiles for the past three weeks and a similar pattern is expected this week. As per the consensus, the EIA will report a build-up of oil inventories by 0.333 million barrels for the past week.