Asian Stock Market: Bulls and bears jostle with eyes on central banks

• Asian equities traded mixed as market players turn cautious ahead of the key events.
• US stock futures print mild gains tracking Wall Street benchmarks but yields rebound with eyes on Fed.
• China, Japan stay ready for further stimulus, New Zealand PM Ardern eases virus-led activity controls.
• Omicron fears escalate in the West, could stop policy hawks.

Asian shares struggle to cheer for Friday’s upbeat Wall Street performance and easy inflation fears during Monday. However, the bloc leaders’ readiness to propel the domestic economies, with monetary and fiscal measures, seems to help the investors stay cautiously optimistic ahead of crucial events lined up for publish during the week.

That said, MSCI’s index of Asia-Pacific shares ex-Japan rises 0.81% while Japan’s Nikkei 225 copies the move with 0.85% intraday upside by the press time.

Japan’s Prime Minister Fumio Kishida recently said, per Reuters, “If there is a crisis, the government will take appropriate fiscal measures.” On the other hand, Chinese policymakers vowed to use monetary and fiscal policy tools to stabilize the world’s second-largest economy in 2022 during the annual Central Economic Work Conference.

Elsewhere, the UK escalates covid alert level from 3 to 4 amid a jump in the cases of the South African covid variant, dubbed as Omicron. Alternatively, New Zealand (NZ) Prime Minister (PM) Jacinda Ardern eased activity restrictions citing a reduction in the virus numbers at home. With this, the UK stock futures and NZX 50 print stay firmer by the press time.

It’s worth noting that Australia announced $7.0 billion new loans for small businesses hit by the virus-led lockdowns, which in turn joined firmer prices of Dalian iron ore futures to help the ASX print 0.80% daily upside at the latest. Moving on, stocks in China, South Korea and Indonesia print mild gains by the press time.

Market sentiment improved on Friday after the US Consumer Price Index (CPI) refrained from providing any major blow to the markets than already feared. That said, the US CPI matched expectations of 6.8% YoY, versus 6.2% prior, while flashing the fresh 39-year high for November. Adding strength to the GBP/USD bounce were stable inflation expectations revealed via the University of Michigan Consumer Sentiment Index, to 70.4 for December.

The receding fears of US inflation helped Wall Street benchmarks and weighed on the US Treasury yields, as well as the greenback. Even so, the 10-year Treasury yields stay firmer around 1.50% after snapping a two-week downtrend the previous week.

Looking forward, a lack of major data/events for Monday will highlight risk catalysts for fresh impulse. However, major attention will be given to the Fed’s reaction to the Omicron woes and reflation fears. The market expects faster tapering and/or signals for rate hikes.

Read: US Treasury yields consolidate recent losses as traders await Fed signals