Asian Stock Market: Drifts lower amid Fed rate hike concerns, virus fears

• Asian equities grind lower as market fears Fed action following 40-year high US inflation.
• Australia, Britain report all-time high daily infections, Tokyo pushes up virus-led alert level.
• US proposes more UN Security Council sanctions on North Korea for missile tests.

Asia-Pacific markets fail to track Wall Street gains as investors fear stiff monetary policies ahead. Also challenging the sentiment are issues concerning the coronavirus and geopolitics that together drowns risk appetite during early Thursday. However, a lack of major data and sluggish yields limit losses heading into the European session.

A 40-year high US inflation figure propels the US Treasury yields, after an initially negative reaction. In addition to the 7.0% YoY figures of the US Consumer Price Index (CPI) for December, hawkish Fedspeak also inflates odds of a rate hike in March.

Elsewhere, Australia and the UK print all-time high daily covid infections while Japan’s COVID-19 cases rose to a four-month high, which in turn pushed Tokyo towards the second highest virus alert level.

It’s worth noting that the US proposal of levying extra sanctions on North Korea, for a slew of missile tests in recent days, also contributes to the risk-off mood.

Amid these plays, MSCI’s index of Asia-Pacific shares outside Japan drops 0.20% whereas Japan’s Nikkei 225 declines 1.0% by the press time.

Further, Australia’s ASX 200 rises 0.50% as PM Morrison sounds hopeful of overcoming the virus conditions and announced an easing of activity restrictions for close contacts to tackle supply crunch. India’s BSE Sensex is also on the same line as the economy battles a jump in the virus cases ahead of the national budget announcement, up for publishing on February 01.

Additionally, stocks in China drown Hong Kong, Indonesia and South Korean markets while S&P 500 Futures also print mild losses by the press time. That said, the US Treasury yields snap the recent downtrend as traders await more clues to confirm hawkish expectations from the Fed.

Looking forward, the Fed policymakers’ speeches will be crucial for near-term market direction as they approach the blackout period before the monetary policy meeting, during January 25-26. Also important will be the US Producer Price Index (PPI) for December and weekly jobless claims.

Read: US Treasury yields lick post US inflation wounds amid hawkish Fedspeak