Asian Stock Market: Bears keep the reins amid inflation, growth woes

• Asia-Pacific shares remain pressured amid firmer inflation data, downbeat growth forecasts and central bank inaction.
• Japan, Australia print strong inflation numbers, IMF cuts Asia growth outlook.
• BOJ defends status quo despite upwardly revising inflation forecasts.

Asian shares hold lower ground while tracking global cues as fears surrounding inflation and growth prevail during early Friday.

While portraying the mood, the MSCI’s index of Asia-Pacific shares outside Japan drops nearly 1.0% as bears attack the lowest levels since March 2020 whereas Japan’s Nikkei 225 loses 0.73% intraday heading into the European session. It’s worth noting, however, that the downbeat yields have earlier favored the equity buyers but the hawkish ECB and strong US Gross Domestic Product (GDP) drowned the stocks afterward.

A 33-year high Tokyo inflation data joined strong Australia Producer Price Index (PPI) to keep bears hopeful as the International Monetary Fund (IMF) cut Asia's economic forecasts. “The IMF cut Asia's economic forecasts on Friday as global monetary tightening, rising inflation blamed on the war in Ukraine, and China's sharp slowdown dampened the region's recovery prospects,” said Reuters. The news also adds that the IMF cut Asia's growth forecast to 4.0% this year and 4.3% next year, down 0.9% point and 0.8 points from April, respectively. The slowdown follows a 6.5% expansion in 2021. Further details suggest that the Washington-based institute expects China's growth to slow to 3.2% this year, a 1.2-point downgrade from its April projection, after an 8.1% rise in 2021. The world's second-largest economy is seen growing 4.4% next year and 4.5% in 2024, the IMF said as per Reuters.

On a broader front, Thursday’s US data weighed on the Fed wagers even as the headline US Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). The reason could be linked to a fifth consecutive fall in private consumption that challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting.

That said, the sluggish US Treasury yields and the risk-off mood could also be held responsible for the Asia-Pacific market’s sour conditions. That said, the US Dollar Index (DXY) retreats to 110.50, following Thursday’s recovery from the five-week-low, whereas commodities are slightly red amid the market’s indecision.

Moving on, the US Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior, will be crucial for traders to watch for clear directions. A firmer print of the Fed’s preferred inflation gauge could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the risk-safe assets ahead of the next week’s FOMC.