Asian Stock Market: US inflation-led relief jostles with pre-Fed anxiety, China concerns

• Asian equities remain mildly bid as easing fears of higher rates jostle with challenges for sentiment.
• US inflation raised hopes of Fed’s pivot in early 2023 but Powell isn’t famous for dovish moves.
• ADP cuts Emerging Asia outlook, IMF’s Georgieva expects slower growth for China.
• Japan’s Tankan figures flash mixed signals, RBA’s Lowe refrained from speaking on monetary policy.

Risk appetite remains firmer in Asia during early Wednesday, even as the Treasury bond yields remain directionless and the US Dollar licks its wounds around a six-month low by the press time.

While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan printed mild losses but Japan’s Nikkei 225 rises 0.75% intraday to 28,165 at the latest. That said, Japan’s Tankan data shows that Q4 manufacturers' mood worsens while inflation expectations jump to record highs.

“Business confidence among big Japanese manufacturers worsened in the three months to December for a fourth straight quarter, the Bank of Japan's closely watched Tankan survey showed, amid rising costs of living and a slowdown in the global economy,” reported Reuters. The news also stated that Japanese firms' inflation expectations for one and three years ahead both hit the highest level on record.

Elsewhere, the risk-negative catalysts surrounding China also seem to restrict the EUR/JPY latest moves. The International Monetary Fund (IMF) Managing Director Kristalina Georgieva was spotted expecting slower economic growth for China due to the latest jump in the daily Covid cases. Additionally, Bloomberg came out with the news suggesting that the Chinese leaders delayed the economic policy meeting due to the COVID-19 problems. On the same, the Asian Development Bank (ADB) cut China's 2023 economic growth forecast to 4.3% from the 4.5% estimate in September.

It should be noted that the Reserve Bank of Australia (RBA) Governor Philip Lowe spoke recently at the AusPayNet Annual Summit. "Overall, we are optimistic that least-cost routing will help counter the forces that are adding to merchants' payment costs, particularly for small businesses," Lowe said per Reuters. With this, the ASX 200 marks 0.60% intraday upside while NZX 50 rises 0.25%.

Furthermore, hopes of more stimulus from China, raised by the policymakers in Beijing, contrast with the Covid woes to limit the market sentiment.

On a broader front, the S&P 500 Futures print a three-day uptrend near 4,065, up 0.25% intraday, whereas the US 10-year Treasury yields decline one basis point (bps) to 3.49%, after snapping the three-day downtrend.

To sum up, stocks in the Asia-Pacific region remain firmer but the upside momentum is likely to be challenged by the  US Federal Reserve (Fed).

Also read: S&P 500 Futures grind higher, US Treasury bond yields stay pressured as markets await Fed announcements