Asian Stock Market: Full markets fail to overcome trader’s dilemma on softer yields, Omicron fears

• Asia-Pacific equities traded mixed even as Australia marks positive start of trading week.
• Doubts over China’s economic outlook, a jump in covid cases and Fed rate hike expectations favor bears.
• Stimulus hopes, studies showing fewer odds of Omicron-linked hospitalization keep buyers hopeful amid sluggish markets.

Asian traders continue suffering from indecision although the Aussie equity benchmark rises over 1.0% after a long weekend. Sluggish markets could be linked to the holiday season and mixed messages concerning the South African COVID-19 variant dubbed as Omicron.

While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan drops 0.60% whereas Japan’s Nikkei 225 prints 0.70% intraday losses by the press time of the late Asian session on Wednesday.

It’s worth noting that a record jump in covid infections couldn’t disappoint Australian investors amid the government’s 90% vaccinations and push for boosters. Shares in New Zealand followed the biggest trading partner as NZX 50 rises 0.65% at the latest.

Bloomberg’s aggregate index of eight early indicators hints that China’s economy expanded at a moderate pace in December. Further, a second consecutive day when the global covid cases top one million weighs on the risk appetite.

It’s worth noting that a lack of liquidity during the year-end holiday mood, a light calendar and hopes of fewer hospitalizations due to Omicron keep the markets hopeful. The same could be witnessed in mild gains of Indian shares even as China, Indonesia and South Korea prints losses by the press time.

On a broader front, the US 10-year Treasury yields remain pressured around 1.475% while the two-year benchmark, which jumped to the highest since March 2020, also flirts with a 0.742% level, down 0.8 basis points (bps). Further, the stock futures reversed the early Asian gains heading into the European session.

Given the recent jump in the US inflation expectations, the Fed is expected to announce the much-awaited rate hike earlier in 2022, which in turn offers an additional challenge to the market sentiment. The US inflation expectations data, as per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED), stayed near the three-week high of 2.50% at the latest.

Looking forward, the current risk-off mood may prevail a bit longer while the US Pending Home Sales and Goods Trade Balance for November will decorate the calendar.