Asian Stock Market: Fears of banking turmoil propels further downside, oil drops on steady PBOC

• Asian stocks have continued their downside journey amid deepening fears of banking turmoil.
• UBS-Credit Suisse deal failed to provide a cushion to Asian equities.
• An unchanged monetary policy by the PBoC has impacted the oil price.

Markets in the Asian domain witnessed an intense sell-off on Monday. The week started with the downside bias observed last week backed by a potential global banking meltdown. S&P500 futures generated significant gains in early Asia, however, fears of global banking turmoil activated sellers to trigger shorts. It seems that rallies are being capitalized as selling opportunities, which indicates a dismal market mood.

The US Dollar Index (DXY) is displaying a lackluster performance around 103.80. It seems that the market is preparing the fresh ground for action ahead of the interest rate policy by the Federal Reserve (Fed).

At the press time, Japan’s Nikkei225 tumbled 1.06%, ChinaA50 remained choppy, Hang Seng plunged 2.61%, and Nifty50 dropped 1.07%.

The UBS-Credit Suisse deal has failed to provide support to Asian stocks. Sky News reported that under the takeover UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse. And, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.

Chinese equities remained sideways despite the interest rate decision announcement by the People’s Bank of China (PBoC). The central bank kept the one-year and five-year Loan Prime Rate (LPR) steady at 3.65% and 4.30% respectively. Contrary to the unchanged interest rate decision, the street was anticipating further expansion in the monetary policy stance.

The economy in China is on a track for economic recovery after a prolonged lockdown due to the epidemic. Therefore, a heavy stimulus is required to spurt the growth rate and support the vulnerable real estate market.

On the oil front, the oil price has faced pressure as PBoC maintained status-quo on interest rates. The world is betting largely on economic recovery in China, which would fuel up the oil demand. It is worth noting that China is the largest importer of oil and an absence of expansionary monetary policy announcement by the PBoC impacted oil price.