Asian Stock Market: Upside remains capped as Fed alarms recession fears, oil advances

• Asian indices are slightly bullish as the DXY has extended its losses after Fed’s monetary policy.
• Softening retail demand has trimmed the Fed’s less hawkish guidance optimism.
• Oil prices are likely to extend gains as EIA has reported a fall in oil stockpiles.

Markets in the Asian domain are displaying a modest strength as a risk-on mood has improved the risk appetite of investors. The announcement of an interest rate hike by the Federal Reserve (Fed) along with less-than-expected hawkish guidance has dragged the US dollar index (DXY) significantly.

At the press time, Japan’s Nikkei225 added 0.20%, China A50 gained 0.65%, Nifty50 jumped 0.69% while Hang Seng eased 0.37%.

It is worth noting that the extent of weakness in the DXY from Tuesday is extremely higher than the strength displayed by Asian equities. Apart from the Fed’s less hawkish guidance, the reason behind plummeting DXY is the accelerating odds of a recession in the US economy.

Fed chair Jerome Powell in his commentary highlighted the softening retail demand. A slump in overall demand led by soaring price pressures will result in less business for the Asian markets and therefore lower corporate earnings for exporting businesses.

Meanwhile, the DXY is likely to establish below 106.00 as it is tapping the immediate support around the same with severe pressure. Also, a downbeat release of the US Gross Domestic Product (GDP) on Thursday will trigger a fresh bearish impulsive wave.

On the oil front, oil prices have witnessed a mild correction after attempting a break above the immediate hurdle of 98.00. On a broader note, the black gold is advancing towards the critical figure of $100.00 as oil stockpiles have dropped in the US along with an increase in demand for gasoline. The Energy Information Administration (EIA) reported a fall in oil inventories by 4.5 million barrels last week.