Asian Stock Market: Firmer yields, Alibaba test bulls amid stimulus hopes

• Asian equities fail to track mildly bid US stock futures.
• Fitch warns over rating downgrades for India, Japan but not for Australia.
• China’s Alibaba slumps 11% on earnings, reignites regulatory concerns.
• Japan braces for record aid package, US BBB is in the House while China eyes tax relief.

Asia-Pacific investors remain at loggerheads despite a brighter start of Friday in the overseas markets. The reason could be linked to China-led fears and firmer Treasury yields during sluggish hours heading into the European session.

Leland Miller, Chief Executive Officer of China Beige Book said, per Bloomberg, “China’s economy is slowing more than people think and the outlook is for weaker growth going forward as the government is unlikely to step in with significant stimulus.”

On the other hand, China’s Securities Daily mentions, “China to roll out more comprehensive measures to cut taxes and fees by 500 billion yuan ($78.34 billion) or even higher in proper time.”

Above all, over 11% slump of Alibaba due to downbeat earnings and Beijing’s regulatory crackdown renews market fears even as Evergrande-linked woes are likely receding. That said, stocks in Hong Kong are down nearly 2.0% while Chinese equities trade mixed.

Further, MSCI’s index of Asia-Pacific shares outside Japan drops 0.70% whereas Japan’s Nikkei 225 prints 0.45% intraday gains by the press time.

It’s worth noting that markets in India are off and those from New Zealand track their Chinese counterparts, also weighed down by the escalating hopes of the Reserve Bank of New Zealand (RBNZ) rate hikes. Alternatively, Australia’s ASX 200 gains 0.20% at the latest as the global rating giant Fitch revised the outlook to stable from negative. Fitch also said, “Rating downgrades could occur for countries such as India, Japan and the Philippines, which are on Negative Outlook, if we assess that the likelihood of authorities stabilizing or reducing the public debt/GDP ratio in the next few years is waning,” per Reuters. It should be observed that markets in India are off due to Guru Nanak Birthday.

On the positive side, talks of stimulus and mixed comments from Fed policymakers challenge the bears. The White House expects that the Build Back Better (BBB) plan would reduce the deficit by $112 billion over the next decade in its new analysis and the same increases the odds of the climate and social spending bill’s passage as it's getting voted. Further, Japanese Prime Minister Fumio Kishida announced a fresh spending plan of around 56 trillion yen ($490 billion) during early Friday. On the same line, China’s Securities Daily mentions, “China to roll out more comprehensive measures to cut taxes and fees by 500 billion yuan ($78.34 billion) or even higher in proper time.”

Against this backdrop, US 10-year Treasury yields snap two-day downtrend while the S&P 500 Futures refresh record top following its Wall Street benchmark. Further, the US Dollar Index (DXY) also recovered as the inflation expectations rise.

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