Asian Stock Market: Traces S&P 500 Futures to prod two-week high on mixed China, Fed bias, yields dribble

• Market sentiment remains cautiously optimistic as traders await more clues to confirm Fed policy pivot, US-China optimism fades.
• MSCI’s index of Asia-Pacific shares ex Japan, S&P 500 Futures seesaw around two-week high.
• US Treasury bond yields lack momentum after refreshing weekly low.
• More clues to confirm Fed bias, global economic recovery eyed for clear directions.

The risk appetite remains firmer even as momentum traders take a breather during early Wednesday.

That said, the market sentiment improved the previous day after downbeat US data fuelled concerns about the Federal Reserve’s (Fed) nearness to policy pivot. Also previously favoring the risk-on mood were headlines surrounding China.

Alternatively, the fresh fears of the US-China tension and the market’s lack of belief in the Fed’s rate cut seem to recently prod the optimists.

As a result, the MSCI’s index of Asia-Pacific shares outside Japan and the S&P 500 Futures seesaw around the intraday high while the US Treasury bond yields seesaw at the weekly low. That said, the US Dollar Index portrays a corrective bounce while prices of the Gold and the WTI crude oil edge higher.

China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Elsewhere, the previous day’s disappointing US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias.

It should be noted that Australia’s ASX 200 leads the gainers after witnessing downbeat Aussie inflation data while China stocks dribble. Further, Japan’s Nikkei pays little heed to fresh challenges to the Bank of Japan’s (BoJ) ultra-easy monetary policy.

Given the lack of clarity, traders will seek more clues to confirm the Fed’s policy pivot in 2023 and the stabilization of the US-China ties, as well as more stimulus from Beijing, for clear direction. Talking about the data, the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) will direct intraday moves ahead of the US Core PCE Price Index and Nonfarm Payrolls (NFP).

Also read: Forex Today: US Dollar tumbles as markets get ready for key data