Asian Stock Market: Inflation fears pamper bears during full markets

• Asian stocks track Wall Street losses as Japan returns from holiday.
• Inflation fears continue to haunt bulls, Tokyo CPI rose sharply, RBA drastically revised CPI forecasts.
• US employment report will be crucial amid doubts over 50 bps rate hikes of Fed.

Risk aversion runs on full steam during early Friday’s Asian session as traders fear a faster increase in price growth to stall the economic growth. The magnified reaction to sour sentiment could also be linked to the return of China and Japan after multiple days of holidays.

While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 2.70% whereas Japan’s Nikkei 225 prints 0.84% intraday gains by the press time. Headlines from the global rating agency Fitch, suggesting that monetary tightening poses medium-term risks to Japan’s debt dynamics seem to have favored the Japanese equity markets of late.

Elsewhere, Australia’s ASX 200 dropped over 2.00% as the RBA’s quarterly Monetary Policy Statement (MPS) justifies the Aussie central bank’s latest rate hike by significantly revising up inflation forecasts. The MPS also expects a 1.75% cash rate in December 2022, versus the latest print of 0.35%.

On the same line is New Zealand’s NZX 50 which marks around 2.0% daily loss by tracking equities in China, as well as due to the broad risk-aversion wave. Chinese indices see the red as covid adds to the broad fears relating to inflation and economic growth.

It should be observed that the risk-off couldn’t weigh the oil prices as global producers ignore the market push for more output, as well as the European Union’s (EU) oil embargo on Russian imports. This helps the Indian bears to keep reins, in addition to the broad risk-off mood, as New Delhi relies heavily on oil imports amid record deficits.

On a broad front, S&P 500 Futures drop back towards the yearly low marked earlier in the week, down 0.33% at the latest, whereas the US 10-year Treasury yields rose one basis point (bps) to 3.08%, surrounding the highest levels since late 2018 marked on Thursday.

Although the risk-aversion wave keeps equity buyers away, today’s US employment data will be crucial as the Fed’s judgment to deliver “only” 50 basis points (bps) of rate hike relies on hopes of easing the labor market crunch and inflation fears.

Read: S&P 500 Futures decline, yields stay firmer as inflation woes weigh on sentiment ahead of US NFP