Asian Stock Market: Bulls cheer PBOC’s prudent policy, market mood soars, DXY eases

• Asian equities have rebounded firmly amid PBOC’s prudent monetary policy.
• The PBOC has reduced its five-year LPR by 15 bps while the one-year LPR kept unchanged.
• Oil prices are softer on galloping demand worries.

Markets in the Asian domain are advancing sharply higher as the risk-off impulse loses traction and global equities are underpinned by the market participants. The Asian equities have jumped strongly in their early trade after the People’s Bank of China preferred to stick to its prudent monetary policy. The PBOC slashed the five-year Loan Prime Rate (LPR) by 15 basis points (bps). Now, the five-year LPR stands at 4.45% vs. 4.60% recorded last month. While the one-year LPR has kept unchanged at 3.75%.

At the press time, Japan Nikkie225 jumped 1.16%, China A50 surged 1.80%, Hang Seng gained 1.96% while India’s Nifty50 outperformed by adding 2.16%.

The situation of rising inflationary pressures in China was compelling for a conservative monetary policy. Thanks to the advancing oil prices, China’s yearly Consumer Price Index (CPI) in April climbed to 2.1%, firmly higher than the forecast of 1.8% and the prior print of 1.5%. While increasing demand worries amid the resurgence of the Covid-19 were demanding fiscal stimulus. Considering all the catalysts, the PBOC preferred to take the bullet and kept a dovish tone on policy rates.

Meanwhile, the US dollar index (DXY) has failed to sustain above the round-level support of 103.00. In the early trade, the DXY was advancing higher after a super-bearish Thursday. On the oil front, oil prices dropped sharply in early Tokyo amid rising demand concerns due to recession fears in Europe and rising Covid-19 fears in China, and a liquidity squeeze in the US.